optionvol-NBC-Bay-Area

--- OVERVIEW ---
GME is trading $18.14, up 1.7% with IV30™ down 4.6%. The LIVEVOL® Pro Summary is included below.



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GameStop Corp. (GameStop) is a holding company. GameStop is a multichannel video game retailer. It sells new and used video game hardware, physical and digital video game software, accessories, as well as personal computer (PC) entertainment software and other merchandise.

I found this stock using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol. An interesting phenomenon has occurred in terms of the vol level as earnings approach in Aug. First, let's look at the scan details, below.


Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20™ LTE 10
HV180™ - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching.

--- ANALYSIS ---
The GME Charts Tab (six months) is included 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, we can see the disturbing trend which is, for lack of a better word, bad. On 1-25-2012, the stock closed at $25.00. As of this writing, the price is down 27.4% from that level while the SPX is up 1.6% in that same time frame. Looking even further back, GME closed at $26.80 exactly one year ago. The 52 wk range is [$17.11, $27.40], so the price action is getting dangerously close to an annual low. The most recent earnings report came out on 5-17-2012 BMO, and saw the stock drop from $20.84 to $18.52 or down 11.1% in a day.

On the vol side, we can see how the implied is now elevated to both of the historical realized vol measures (and thus the scan trigger). The dip in HV20™ reflects the fact that it's now been more than 20 trading days since the earnings drop on 5-17-2012. The vol comps are:

IV30™: 42.41%
HV20™: 29.08%
HV180™: 34.24%

What's interesting about the vol level is that while it is elevated to the historical realized measures, it's in fact depressed relative to it's own annual history. The 52 wk range in IV30™ is [28.99%, 63.44%], putting the current level in the 38th percentile -- certainly not an "elevated" state relative to that measure. The annual highs in IV30™ all surround earnings (which makes sense). More on that in a sec...

Let's turn to the Skew Tab, below.




We can see that Aug is elevated to Jul -- that's likely due to the next earnings release which could be inside Aug expiry (near the end). But, if we look a little more closely at the vertical axis, we can see that the vol diff isn't tremendously large. The Aug vol would be in the 49th percentile of the IV30™ annual range.

--- SUMMARY ---
Finally, let's look to the Options Tab (below).



Across the top we can see the monthly vols 42.41% and 46.07% for Jul and Aug, respectively. This poses an interesting reality where the Jul (non-earnings vol) is "expensive", while the Aug (earnings vol) is "cheap." Of course, much of this is predicated on there in fact being an earnings event in Aug, which is not a certainty.

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--- OVERVIEW ---
BODY is trading $8.63, down 46.0% with IV30™ up 165.8%. The LIVEVOL® Pro Summary is below.



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Body Central Corp. is a specialty retailer of young women's apparel and accessories operating retail stores in the South, Mid-Atlantic and Midwest regions of the United States. In addition, the Company operates a direct business through its e-commerce Website, www.bodyc.com, and Body Central catalog.

This is a vol and stock price note on a name that has been crushed of late with two ~50% down days since May, including today's action.

--- ANALYSIS ---
Let's start with the Charts Tab (six months), below, then get to the news. 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've highlighted the two catastrophes of late. The first was due to an earnings miss, the second (today) on lowered guidance. I've included news snippets from both of those days, below.

---
5-3-2012

(Reuters) - Body Central Corp (BODY) forecast second-quarter results below analysts' estimates as it expects a sharp drop in same store sales, sending the apparel maker's shares down 32 percent.

"We continue to see softness in overall store sales trends through April," Chief Executive Allen Weinstein said.

The company expects second-quarter comparable store sales to fall 5 percent to 7 percent, compared with a 15 percent rise in the year-ago period.

The company said it expects to earn 26 to 28 cents per share, on revenue of $80 million to $82 million in the second quarter.

Analysts were expecting earnings of 36 cents a share on revenue of $86.6 million, according to Thomson Reuters I/B/E/S.

The company posted first-quarter results that met Wall Street view of 36 cents per share. Revenue was $82.7 million, slightly above analysts' average expectation of $82.1 million.

Source: Reuters via Yahoo! Finance; Body Central outlook disappoints, shares plunge, written by Arpita Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty.
---

So guidance was lowered to 26 to 28 cents, and then...

---
6-19-2012

JACKSONVILLE, Fla. (AP) -- Clothing-store chain Body Central Corp. is cutting its second-quarter and full-year earnings and revenue forecasts, citing soft sales since April. The company's stock lost nearly half its value.

Shares of the women's clothing and accessories company, whose brands include Body Shop and its namesake, tumbled $7.42, or 46.4 percent, to $8.57 in morning trading on Monday. The stock fell to a fresh 52-week low of $8.20 earlier in the session.

Body Central now expects earnings of 19 cents to 21 cents per share on revenue of $77 million to $79 million. Its prior guidance called for earnings of 26 cents to 28 cents per share on revenue of $80 million to $82 million.

Analysts polled by FactSet had predicted earnings of 27 cents per share on revenue of $82 million.

Revenue at stores open at least a year is expected to drop 7 percent to 9 percent. Body Central's previous forecast was for a 5 percent to 7 percent decline.

This figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.

For the full year, the Jacksonville, Fla. company now foresees earnings of $1.07 to $1.11 per share on revenue in a range of $323 million to $328 million. Body Central previously predicted earnings of $1.34 to $1.38 per share on revenue of $333 million to $337 million.

Wall Street expects earnings of $1.35 per share on revenue of $335.4 million.

The company now anticipates that revenue at stores open at least a year will fall 4 percent to 6 percent for the fiscal year. Its prior outlook was for a 1 percent to 3 percent decline.

Source: AP via Yahoo! Finance; Body Central plunges after cutting forecasts
---

Clearly the news is bad, but I must say the reaction to the news today seems a bit abrupt. In totality the company revenue has gone from a projection of $86.6 million to now $77 million (for the second quarter). The fear seems to be two -fold:

1. Same store sales went from an expected improvement to a worsening (negative growth).

2. The second quarter numbers / projections from management seem a bit flighty. Or, in English, management's sales visibility seems quite poor.

On the vol side, we can see how much the implied has risen today. I've included a second chart with just a three month window and just the IV30™, to better demonstrate the vol move today.



Note that after the earnings release, vol came in (down), which is normal even if it's bad news. In a sense, the news is now known, so there is less risk. But, today's announcement has exploded vol over 165% higher. There is no comfort in management's disclosure today -- no sense that "now the bad news is known." In fact, the options now reflect more than twice the risk after this disclosure. That's highly unusual and points to a great deal of mistrust in the accuracy of forecasts moving forward.

Let's turn to the Skew Tab to examine the month-to-month vols.



We can see that Jul and Aug have essentially identical shapes, but that Jul is substantially elevated to Aug. In English, the option market reflects considerably higher risk in the near-term than the intermediate -- almost like the market is holding its breath for another surprise disclosure.

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



Across the top we can see that Jul is priced to 117.43%, while Aug is priced to just 85.92%. It's note worthy that before today, the 52 wk high in IV30™ was just 66.96%. That number helps put the Jul and Aug vols into context, which is to say, one is high, the other is really really high.

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--- DISCLAIMER --
This is trade analysis, not a recommendation.


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--- OVERVIEW ---
VRTX is trading $56.50, up small with IV30™ unched. The LIVEVOL® Pro Summary is below.



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Vertex Pharmaceuticals Incorporated (Vertex) is in the business of discovering, developing, manufacturing and commercializing small molecule drugs for the treatment of serious diseases. The Company’s two products are INCIVEK (telaprevir), which is approved for the treatment of patients with genotype 1 hepatitis C virus (HCV), infection, and KALYDECO (ivacaftor), which is approved in the United States for the treatment of patients six years of age and older with cystic fibrosis (CF), who have at least one copy of the G551D mutation in the cystic fibrosis transmembrane conductance regulator (CFTR), gene.

This is a vol note in a bio-tech that is hitting a new annual high in IV30™ and which has had a propensity to gap of late.

--- ANALYSIS ---
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, we can see the two dramatic gaps of late. First the abrupt rise on 5-7-2012 from $37.41 to $58.12 or 55.3%. In fact, the next day the stock rallied to $64.16, making the two day move a 71.5% rise. Here's the news that drove that move:

---
Vertex shares rose $20.71, or 55%, to $58.12 Monday following the announcement that two drugs -- the experimental VX-809 and currently marketed Kalydeco -- significantly improved lung function in patients with the most common genetic mutation causing cystic fibrosis.

Monday's data were the result of an interim analysis from a relatively small number of patients, so without a doubt, caution is warranted and the benefit seen from the two-drug therapy must be maintained and confirmed in a larger, pivotal trial.

But if we assume VX-809 and Kalydeco are approved, the revenue numbers for Vertex get very, very large: $4 billion a year in peak cystic fibrosis sales is a floor. The company's cystic fibrosis drugs could top $6-7 billion a year, easily.

There are 70,000 cystic fibrosis patients worldwide and Vertex could easily treat more than half of them with Kalydeco or the VX-809-Kalydeco combination. A year of Kalydeco therapy today costs $294,000 -- not uncommon for orphan disease pricing. Vertex may cut the price of the two-drug regimen but even if you assume $200,000 per year, the sales potential is enormous.

Vertex cystic fibrosis revenue of $6-7 billion year is equal to what Gilead generates in revenue every year from is antiviral product sales, mostly its dominant HIV drugs.

Source: TheStreet via Yahoo! Finance; Vertex Is the Next Gilead Sciences or Alexion, written by Adam Feuerstein.
---

Note the description of the results, "[...] the result of an interim analysis from a relatively small number of patients, so without a doubt, caution is warranted." But still, whoa to those numbers.

But then, on 5-29-2012 (just three weeks later), the stock gapped down from $64.85 to $57.80 or down 11%, and reached a day low of $50.00. The stock did rebound the next day to back over $60. The news that drove the drop is included below and is rather unbelievable (or at east odd).

---
What: Shares of drug developer Vertex Pharmaceuticals plunged as much as 23% Tuesday after overstating the clinical-trial response to its combination Kalydeco/VX-809 cystic fibrosis treatment.

So what: Vertex shares soared earlier this month after data suggested that the two-drug therapy was on the straight path to becoming a blockbuster, but management's mistake -- 35% of patients, not the previously stated 46%, showed improved lung function -- is naturally forcing investors to sober up a bit. While the revised data is still higher than Wall Street had initially expected, the "misinterpretation" of the initial results calls management's credibility into question.

Source: The Motley Fool via Yahoo! Finance; Why Vertex Shares Got Crushed, written by Brian D. Pacampara.
---

It's hard for me to fathom that line, "but management's mistake -- 35% of patients, not the previously stated 46%, showed improved lung function." What?...

In any case, the stock has found a sort of relative equilibrium in the $55 - $60 range, which is well above the mid $30 range from before the initial results.

The only note I'd make on the vol portion is that the implied is now at annual high. Or, said differently, risk as reflected by the option market is at an annual high.

Let's turn to the Skew tab to examine the month-to-month and line-by-line vols.



The thing that jumps out at me is simply how elevated the Jul options are to the back months. Simply stated, the option market reflects increased risk in the near-term relative to the mid-term. The skew shape is a bit flatter than "normal." In English, there is no real "handicapping" demonstrated by the options market -- the vol is elevated but neither upside nor downside is especially more likely.

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



Across the top we can see that Jul is priced to 72.44% while Oct is priced to 56.73%. It seems likely that "something" is coming soon. It'll be interesting to see what we can learn from that "something."

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--- DISCLAIMER --
This is trade analysis, not a recommendation.

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--- OVERVIEW ---
QLIK is trading $21.80, up 0.7% with IV30™ down 0.4%. The LIVEVOL® Pro Summary is included below.



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Qlik Technologies Inc. (QlikTech) provides business intelligence (BI) solution. The QlikView Business Discovery platform (QlikView), helps people create and share insights and analysis in groups and across organizations. Business users can explore data, ask and answer their own stream of questions and follow their own path to insight on their own and in teams and groups.

I found this stock using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol.


Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20™ LTE 10
HV180™ - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching.

--- ANALYSIS ---
The QLIK Charts Tab (six months) is included 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, we can see how the stock has recently made a new six month low after reaching a six month high in early Apr. In fact, the stock is down more than 52% in the two month period (ish) from 4-2-2012. The 52 wk range in QLIK is [$19.59, $35.62].

On the vol side, I've highlighted how elevated the implied is relative to the two historical realized measures. It's this vol diff that triggered the custom scan. Specifically:

IV30™: 60.48%
HV20™: 41.71%
HV180™: 49.06%

Let's turn to the Skew Tab, below.



We can see how the front month is depressed to the back. That's likely a reflection of the vol embedded in the Aug options due to earnings. I also note the odd vol dip in both months for the $21 strike.

--- SUMMARY ---
Finally, let's look to the Options Tab (below).



We can see the vols across the top show Aug (65.92%) priced to more than 5 vol points above Jul (60.48%).  I also note the steep vol rise in the OTM puts to the $14 strike in Aug (which we can see graphically in the Skew Tab, above).

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--- DISCLAIMER --
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--- OVERVIEW ---
LNCR is trading $25.52, up 2.5% with IV30™ up 19.7%. The LIVEVOL® Pro Summary is below.



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Lincare Holdings Inc. (Lincare) is a provider of oxygen, respiratory and other chronic therapy services to patients in the home. The Company’s customers suffer from chronic obstructive pulmonary disease (COPD), such as emphysema, chronic bronchitis or asthma, and require supplemental oxygen, respiratory and other chronic therapy services.

--- ANALYSIS ---
This is a stock and vol note on a company that's been spiking up recently with vol abruptly moving in the same direction. 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, we can see that from late Mar to early Jun, LNCR stock dipped ~20%. But, it's the recent move that caught my attention. The weird thing is, I have no idea why it's popping.

On the vol side, we can see how the implied has risen with the stock, moving from 27.58% (6-12-2012) to now over 36%. That's a 32% increase in two days.

Let's turn to the Skew Tab to examine the month-to-month and line-by-line vols.



There's a beautiful back to front monotonic vol increase in the term structure, while the vols within each month have maintained their "normal" shape. The elevated vol from the front to the back reflects the risk embedded in earnings, which are likely due out just before Jul expo (but that's just a personal projection based on the last two Jul earnings dates).

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



Across the top, we can see the vol by expiry: 36.30%, 33.01% and 30.20%, respectively for Jul, Aug and Nov. I also note the trading today, the Jul 25 calls have traded 2,373x on just 211 OI. Those trades look like substantially purchases, with the price rising from $1.10 up to $1.30 over a half an hour period near the open.

I do also note that the stock volume is over 1.1 million shares against a daily average of just 806,584 shares, but, I don't see those calls trading with stock (at least not in an obvious way). In English, these look to be naked call purchases.

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--- DISCLAIMER --
This is trade analysis, not a recommendation.


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--- SUMMARY ---
CHK is trading $17.00, up 0.4% with IV30™ up 2.2% as of ~10:30am EST. The LIVEVOL® Pro Summary is below.



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Chesapeake Energy Corporation (Chesapeake) is a natural gas and oil exploration and production company. Chesapeake is engaged in the exploration, development and acquisition of properties for the production of natural gas and oil from underground reservoirs.

--- ANALYSIS ---
This is a vol note focused on an interesting term structure. 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 we can see a fairly long-term move down from late Mar to Mid may. The stock fell from $25.58 (3-20-2012) to $13.55 (5-17-2012), or 47% in ~two months. Since that low, the stock is up 25% to $17. I’ve highlighted the one-day move on 5-11-2012 from $17.18 to $14.81 (14% drop). Here’s the news snippet from that day:

---
Chesapeake Energy Corp. lost more than $1 billion in stock-market value in 46 minutes of trading on Friday after the company disclosed it might be forced to delay plans to sell assets to fund its operations this year.

The beleaguered natural-gas producer spooked investors by discussing the potential delay in a quarterly regulatory filing, which had been expected to be filed a day earlier. The filing included new warnings about the possible need to delay asset deals to comply with terms of a key line of credit.

Source: WSJ.com via Yahoo! Finance; Chesapeake Falls on Cash Worries, written by DANIEL GILBERT AND BEN CASSELMAN.
---

Later in the day Reuters broke a story that eased some of those fears. Here’s that snippet.

---
The company, which has been embroiled in a corporate governance crisis that prompted its move to replace co-founder Aubrey McClendon as chairman, said the new unsecured loan will be used to repay money borrowed under its existing $4 billion revolving credit facility.

"This short-term loan from Goldman and Jefferies provides us with significant additional financial flexibility as we execute our asset sales during the remainder of 2012," McClendon, who will remain as chief executive officer, said in a statement.

The company, the nation's second largest natural gas producer, said it plans to sell $9.0 billion to $11.5 billion in assets this year.

Source: Reuters via Yahoo! Finance; Chesapeake wins breathing space with $3 billion loan, written by Carrick Mollenkamp and Matt Daily.
---

Needless to say, there have been some issues with the firm – selling assets, securing loans to pay off other loans and corporate governance questions. The 52 wk range in the stock is [$13.32, $35.34].

On the vol side, I’ve highlighted two things. First, the vol spike on that loan news – just a reminder of how quickly volatility can rise when governance, liquidity and solvency issues are present. I’ve also highlighted the rising vol right now, which shows IV30™ a touch above the short-term historical realized vol and considerably above the long-term historical realized trend. Specifically:

IV30™: 67.76%
HV20™: 62.73%
HV180™: 53.24%

Let’s turn to the Skew Tab to examine the line-by-line and month-to-month vols.



Note that the yellow curve represents the Jun22 weekly options. What I noticed here is that the back two expirations are essentially right on top of each other. Why would I notice such a thing? Earnings are due out after Jul expiry (probably) and, the next expiration is Oct, a month known for volatile returns. So, in this case, the two vols being the same(ish), is in fact, attention grabbing. Looking back to the Charts Tab (above), we can see how CHK gapped up off of the last earnings report (the “E” icon represents earnings). In other words, the stock can move on that earnings news.

Finally, 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 across the top for each expiry are 73.08%, 67.76% and 69.60% for Jun22 weeklies, Jul and Oct, respectively.

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--- DISCLAIMER --
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--- OVERVIEW ---
RMBS is trading $5.43, up 11.7% with IV30™ up 22.9%. The LIVEVOL® Pro Summary is below.



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Rambus Inc. (Rambus) is an intellectual property and technology licensing company. It is engaged in the design, development and licensing of memory and logic interfaces, lighting and optoelectronics, and other technologies. The Company’s primary focus is the creation, design, development and licensing of patented innovations, technologies and architectures that are foundational to all digital electronics products and systems. Its patented innovations and technologies are provided to customers’ products, components and systems offered and used in semiconductors, computers, mobile applications, gaming and graphics, consumer electronics, lighting displays and general lighting.

This is a vol and stock price movement note in a company that was absolutely decimated in Nov of last year.

--- ANALYSIS ---
Let's start with the Charts Tab (twelve months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red).



On the stock side, we can see the drop in Nov of last year. Here's the news that drove that cataclysm which saw the price dip from $18.04 to $7.11 (61%) on 11-16-2012.

---
The long-running legal wars between Rambus and Micron Technology finally reached a verdict. After eight weeks of deliberations and high-level testimonies from industry giants Intel and Dell, a split jury arrived at a "not guilty" verdict and no damage awards.

The jury found that Rambus "did not meet its burden of proving its case against the two defendants," Micron and Hynix. This antitrust case could have resulted in a $4 billion damage award, to be automatically tripled under California law for a total of $12 billion. Instead, Rambus gets nothing.

Of course, this was just the Superior Court in San Francisco County and not the Supreme Court of the United States. Rambus is "reviewing our options for appeal," and I wouldn't be surprised to see one filed very soon. The amount of potential payouts makes this a make-or-break case for the memory patent wrangler. Having pursued this case for seven years already, Rambus isn't likely to just give up at this point.

A Huge Legal Ruling in the Tech Arena, written by Anders Bylund.
---

I've also highlighted the recent run up in RMBS stock from $4.21 to $5.43 (29%) since 5-18-2012.

On the vol side, I've highlighted the annual high in the implied of 200.18% on 9-22-2012, as well as the heightened level today. It's difficult to see the rise of late given the scale of the one year chart, so I've included the six month chart (vol only), below.



So, while the level today isn't much to speak of relative to the annual high, it is a six month high as the stock has moved up nearly 30% in less than a month. Oddly, with all this recent movement, I don't really see any news on RMBS to justify it.

Let's turn to the Skew Tab.



Really not a lot going on here. The front month (which is really 2.5 days) is substantially elevated to the back months, but that's just a single strike and doesn't necessarily mean very much. Ultimately, it's simply a nickel bid in the $6 strike calls. There is a noticeable upside skew in the Jul options relative to Aug. For whatever it's worth, the options reflect greater upside risk (potential) in Jul than they do in Aug.

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



We can see the vols by expiry across the top. Looking to the actual options chain, we can see that Jul and Aug ATM vol are about equal, but the OTM calls are in fact more elevated in Jul (note the $8 strike, for example).

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--- DISCLAIMER --
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