AsiaInfo Holdings (ASIA) - Takeover "Stuff" Opens Skew Diff

ASIA is trading $13.08, up 1.0% with IV30™ up 5.1%. The LIVEVOL® Pro Summary is below.



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AsiaInfo-Linkage, Inc. (AsiaInfo-Linkage), formerly AsiaInfo Holdings, Inc., is a provider of telecommunications software solutions and information technology products and services in China. The Company’s software and services enables its customers to build, maintain, operate, manage and improve their communications infrastructure.

This is a vol note in what has been a gapping stock... A gapping Chinese stock. Let's start with the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side I have highlighted three moves of late:

11-1-2012: Down 22.1% off of earnings

1-18/19-2012: The stock popped from $8.60 to $9.92 and then to $11.78 in two days. Here's the news:

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What: Shares of AsiaInfo-Linkage jumped 19% today after getting a buyout offer.

So what: Power Joy, a subsidiary of CITIC Capital China Partners, sent a proposal letter to the company offering to buy all of the company's shares in an all cash offer. The price wasn’t released, but the company said it "represents a premium over the current stock price."

Source: AsiaInfo-Linkage Shares Popped: What You Need to Know, written by Travis Hoium.
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2-21-2012: The stock rose 10.7% to $12.95. Here's that news:

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What: Shares of AsiaInfo-Linkage have jumped today, up by as much as 11%, on speculation that the company may be acquired.

So what: According to a Reuters report, several global private equity firms, including well-known names like KKR & Co. and TPG Capital, are considering potential bids for AsiaInfo-Linkage. A possible deal could value the company north of $1 billion.

Source: AsiaInfo-Linkage Shares Jumped: What You Need to Know, written by Evan Niu.
---

Well, there you go. A buyout offer in a Chinese company from another Chinese company... and then buyout rumors from US companies. Let's turn to the Skew Tab, where the vol diff caught my attention.



We can see the ATM vols are actually quite close, but the OTM puts diverge. It's that vol diff that caught my attention.

Finally, let's turn to the Options Tab for completeness.



We can see the ATM vols 67% vs 63% from the front tot he back. Moving to the 10 strike outs, that vol diff opens to 117% to 88% from the front to the back.

This is trade analysis, not a recommendation.

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United States Steel (X) - Depressed Vol... Or Is It?

X is trading $28.24, down 0.9%, with IV30™ down 1.2% as of ~11:25am EST. The LIVEVOL® Pro Summary is below.



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United States Steel Corporation (U. S. Steel) is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe. U. S. Steel has annual raw steel production capability of 31.7 million net tons (tons) (24.3 million tons in North America and 7.4 million tons in Europe).

This is a vol note again – this time on some depressed vol. Let’s start with the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



We can see a sort of quiet period of late. So much so that the HV20™ has fallen to 47.97%. At the same time, the implied has dipped even further. In fact, with the 52 wk range in IV30™ of [31.11%, 89.56%], the current level is in the 19th percentile (annual). In the last six months, this is a new low.

Let’s turn to the Skew Tab.



I’ve included the Feb weeklies (in red). Ultimately, the skew shape is similar across the two monthly and one weekly expiries, each with a bit of an upside skew to the OTM calls. Other than that, the skew is pretty “normal” looking.

Let’s turn to the Options Tab, for completeness.



I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. We can see the vols are 41.82%, 42.03% and 43.67% for the Feb24 weeklies, Mar and Apr monthlies, respectively. So, the overall vol does rise slightly as we move further out. The next earnings report from X should be in late Apr – but after Apr expiration.

When I expand the vol chart to a full year, I find something a bit less than tasty. I’ve included just the IV30™ and HV20™ chart for a year, below.



I’ve circled the portion from last Apr – Jun. Note that both the HV20™ (the historical realized vol) and the IV30™ were well below the current levels for a sustained period of time. In English, there is recent history of vol at this level that did not in fact rise quickly nor did the underlying move more than the option market reflected.

This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 2-22-12

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This is trade analysis, not a recommendation.

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Legal Stuff:
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J.C. Penney Company (JCP) - Vol Falls into Earnings in Gapping Stock

JCP is trading $41.26, down 3.3% with IV30™ down 1.3%. The LIVEVOL® Pro Summary is below.



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J. C. Penney Company, Inc. (jcpenney) is a holding company. The Company is a retailer, operating 1,106 department stores in 49 states and Puerto Rico as of January 29, 2011. Its business is consists of selling merchandise and services to consumers through its department stores and through the Internet Website at jcp.com.

This is a vol note with earnings fast approaching. I last wrote about JCP on 1-26-2012. You can read that post here: J.C. Penney Company (JCP) - Overhaul and EPS Guidance Push Stock and Vol; Skew Bends. That was on the day of the stock pop.

Let's turn to the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



We can see the stock pop on 1-26-2012 (the prior bog has those details). A quick recap can be had from prior headlines:

-- J.C. Penney jumps after saying 2012 EPS may beat at 2010 earnings
-- J.C. Penney unveils new prices, logo, store design
-- jcpenney Unveils Long Term Financial Outlook at Day Two of Launch Event in New York City

On the vol side, we can see the spike in the HV20™ from the move, while the implied rose a bit as well. At the time of writing on 1-26-2012, the IV30™  was over 43%. Now, with earnings approaching, the implied is actually nearly 7% lower. It's that vol move (current level) that caught my attention. The 52 wk range in IV30™ is [31.87%, 66.21%], so the current level is in the 23rd percentile (annual). That's low relative vol, earnings approaching and a stock that just gapped. Oh, and the stock has moved nearly $1.50 today, alone.

Let's turn to the Skew Tab, below.



With earnings due out right before the weekly options expire, it's normal to see that front expiry elevated relative to the rest. We can also see that both the Feb weeklies and the Mar monthlies show an upside bend -- the option market reflects both downside risk and upside potential.

Finally, let's turn to the Options Tab, for completeness.



The Feb weekly options are priced to over 60% vol while Mar monthlies are priced to just over 40%. Those are expected vol differences. Said differently, the Mar ATM straddle is priced to ~$3.44 and the Feb weeklies are priced to ~ $2.07 (mid-market).

This is trade analysis, not a recommendation.

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MetroPCS Communications (PCS) - Skew Moves Abruptly in a Day; Order Flow into Earnings the Culprit

PCS is trading $10.37, up 0.3% with IV30™ up 18.8% as of ~10:45am EST. The LIVEVOL® Pro Summary is below.



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MetroPCS Communications, Inc. (MetroPCS Communications) is a wireless telecommunications provider in the United States measured by the number of subscribers served. The Company offers wireless broadband mobile services under the MetroPCS brand in selected metropolitan areas in the United States.

PCS has earnings due out 2-23-2012 BMO, so the last trading day before earnings would be 2-22-2012 (aka tomorrow). The stock caught my attention for two reasons: (1) Bullish order flow and (2) Upside Skew and a resulting vol diff.

Let’s start with the order flow. The Livevol® Pro Stats Tab and Day’s Biggest Trades are included below.





We can see that over 7,600 calls have traded today, yielding a 34.6:1 call:put ratio. The total daily average volume in PCS is 2,085, so the call volume is substantial. The action has been in the Mar 12 calls, where over 5,250 have changed hands. I’ve included the Options Tab, below.



Note that the existing OI in those calls is just 39, so these are substantially opening. My best guess is that the order flow is getting long these calls, though it is a bit ambiguous. The circumstantial confirming evidence is the skew. Let’s look at that, below.



Check out that awesome upside skew in Mar. While “normal” skew exhibits lower vols as strikes increase, it’s the complete opposite for PCS. That is likely due to order flow. How do I know that? I’ve included the skew chart as of last Friday, below.



And we can see here how normal the skew is – lower vols to higher strikes. Livevol® Pro is pretty awesome… just sayin’. Can’t trade without it.

Finally, let’s look to the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



I wrote about this one for the TheStreet (OptionsProfits), so no specific trade analysis here. I will say that on the stock side, we can see the cataclysmic drop off of earnings in early August of 2011. The stock dropped 36.6% in that one day -- so there's recent history of large moves off of earnings. On the vol side, we can see how just today the IV30™ has picked up. It will likely continue it’s rise into trading tomorrow (ya know, or not...). In any case, that gamma (and vol) in Mar should be expensive given earnings.

This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 2-21-12

To get an e-mail alert when a new pre-market report is posted please send an e-mail to support (support (at) livevol.com) with "Pre-market" in the subject line.

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Canadian Solar (CSIQ) - Stock Rises On Industry News; Vol Continues to Climb into Earnings

CSIQ is trading $4.09, up 14.3% with IV30™ up 11.3%. The LIVEVOL® Pro Summary is below.



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Canadian Solar Inc. (CSI) designs, develops, manufactures and sells solar cell and solar module products that convert sunlight into electricity for a variety of uses. The Company conducts all of its manufacturing operations in China.

This is an order flow note along with some interesting vol. First, the news:

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Solar stocks are surging this morning after the first two Q4 reports (SPWR reported, STP preannounced) were better than expected (feared).
Source: Provided by Briefing (www.briefing.com)
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So, this is an industry wide phenomenon. I've decided to look at a smaller player. CSIQ has traded over 10,000 contracts on total daily average option volume of just 717. Calls have traded on a 25.6:1 ratio to puts. The action is in the Mar 4 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). Based on the orders and the vol move, these feel like substantially purchases, though there is some ambiguity. When looking down the entire option chain for CSIQ, I don't see any OI larger than 3,200, and that's in the Feb options expiring today. In other words, this flow is quite large for CSIQ.



The Skew Tab snap (below) illustrates the vols by strike by month.



We can see a monotonic increase in vol from the back to the front. We project CSIQ will have earnings in the Mar expiry cycle, so that elevated vol is reflecting not just the news today, but also the news "to come."

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



Here's where it gets interesting. CSIQ was trading $7.87 in the middle of August. It hit as low as $2.07 in the Fall. Now it's trading nearly double that price. On the vol side, the IV30™ peeked at over 144% in Oct, then dropped to ~90% as recently as 2-6-2012. Since then it's followed essentially straight line up to over 120%.  Given the recent move in the underlying and with earnings approaching, it wouldn't surprise me if the IV30™ pushed through the annual high by early Mar.

This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 2-17-12

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Download as .pdf: PDF Download




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This is trade analysis, not a recommendation.

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Legal Stuff:
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Kohlberg Kravis Roberts (KKR) - Vol Pops in "Sleepy" Stock

KKR is trading $14.67, up 3.2% with IV30™ up 13.7%. The LIVEVOL® Pro Summary is below.



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Kohlberg Kravis Roberts & Co. is a private equity and venture capital firm specializing in acquisitions, leveraged buyouts, management buyouts, special situations, growth equity, mature, and middle market investments.

I found this stock using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.



The KKR Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



KKR just released an earnings report a few days ago, though the vol moved rather small. There's a trend that has formed in the implied -- namely it's going down. In early Oct the implied was trading over 68%, today it's in the low 30's.

The implied has essentially been following the historical realized vol (short-term). We can see that the HV20™ was as high as 79.47% in Nov and now has dipped to 24.75%. In English, what was once a relatively volatile stock with an implied that reflected that volatility, has now become rather quiet and again, the implied reflects that reality... That makes today's vol pop rather interesting. The vol comps are:

IV30™: 32.88%
HV20™: 24.75%
HV180™: 55.87%

The Skew Tab snap (below) illustrates the vols by strike by month.



Not a whole lot going on here -- the skew shape is normal across all three front expiries. It is interesting that the front (one and a half day expiry) isn't elevated.

Finally, let's look to the Options Tab, for completeness.



All three months are priced between 32% and 34%. It'll be interesting to see if this is just a weird hick-up, or if KKR turns back into a 70 vol stock.

This is trade analysis, not a recommendation.

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E*TRADE Financial (ETFC) - Vol Seller Pounds Depressed Vol

ETFC is trading $9.15 down 0.2%, with IV30™ down 6.7% as of ~11:00am EST. The LIVEVOL® Pro Summary is below.



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E*TRADE Financial Corporation (E*TRADE) is a financial services company, which provides online brokerage and related products and services to the individual retail investors, under the brand E*TRADE Financial.

This is a vol note tied to some very interesting order flow. Let’s start with the flow. ETFC has traded nearly 50,000 contracts in the first hour and a half on total daily average volume of just 8,037. The largest trade has been a sale of 19,200 Mar 9 straddles @ $0.80 (so, 38,400 contracts). The Livevol® Stats and Day’s Biggest Trades snaps are included below.





That order flow has helped push the vol down today. The interesting part of the vol sale is the level that was sold. Let’s turn to the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™- blue vs HV180™- pink).



Check out the vol portion. We can see that the implied is trading at (or near) six month lows and substantially below the historical measures. One point to note, the HV20™ is artificially elevated because of the stock gap off of earnings a couple of weeks ago. Still, the 52 wk range in IV30™ is [24.15%, 109.60%], so the current level is in the 18th percentile (annual). That means the sale was of particularly depressed vol and bets on even lower vol in the future. Very interesting.

Let’s turn to the Skew Tab.



We can see the vol drops from the back to the front monotonically. Or, said differently, the vol is higher further out. The Mar vol that was sold is considerably lower than the Apr expiry.

Let’s turn to the Options Tab.



I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. But, I can say that I’ve highlighted the line that was sold. It looks like ~39% vol. We can also see that Apr is priced to 44.18%. The vol sale is simply a bet that the depressed vol is "correct" and that it will move even lower.

This is trade analysis, not a recommendation.

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