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Tuesday, May 21, 2013

Post Market Report: 5-21-13

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Synta Pharma (SYNTA) - Vol Explodes to Event Due out Soon; But Skew is Highly Irregular.. What Does that Mean?

SNTA is trading $7.52, up 1.2% with IV30™ up 2.2%. The LIVEVOL® Pro Summary is below.

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Synta Pharmaceuticals Corp. is a biopharmaceutical company. The Company is focused on discovering, developing, and commercializing small molecule drugs to severe the medical conditions of the patients with cancer and inflammatory diseases.

This is a vol note on a tiny bio-tech (in terms of revenue) that clearly has an event due out within Jun expiry. We can examine the vol and then I'll show you the phenomenon that really caught my eye. It's quite odd in these types of situations and is an interesting perspective to analyze. For a company with $150K in revenue but a market cap of over half a billion dollars, yeah, there's some risk.

Let's start with the two-year SNTA Charts Tab 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 the equity was trading in the $ range less than two years ago, reached the $12 range earlier this year and has taken a rather abrupt drop from those highs to now ~$7.50. The stock is down 27% in May.

On the vol side we can see the IV30™ (the red curve) rocketing higher of late. In mid March (after earnings), the options were trading at 60% IV30™. In the last two months that level has risen more than 200%. Without reading a single piece of news we know a potential enterprise changing event is coming very soon.

I have included the three-month IV30™ chart in isolation below to better illustrate the vol rise.

Again, we see this in bio-techs when a study result or FDA ruling is due out. This isn't uncommon (though it is interesting). The weird part lies hidden in the skew. let's turn to the SNTA Skew Tab, below.

Here it is.. We see that the front month (red curve) is trading well above the second month (yellow curve), so the event is due out in this expiry rather than next (or so reflect the options). But, checkout that skew shape for Jun -- it's an upside down (negative) parabola, where the option market reflects less risk to the OTM options than the ATM options. In English, in particular to the upside, the option market reflects less likelihood of a large upside move than a small move (or even a downside move). Normally we see parabolic shaped skew in the other direction -- that is, OTM options on both sides show more risk than the ATM options reflecting two-tailed risk, or in English, the option market reflects ~equal possibility of really big bad news or really big good news.

I have included just one example of this parabolic skew below. This is for DNDN (another bio-tech) on 2-27-2012.

Noe how the skew is a right-side up (positive) parabola. Again, this is more normal -- where the upside and downside OTM options reflect two-tailed elevated risk.

Finally, let's turn to the Options Tab.

Across the top we can see that Jun vol is priced to 190.83% and Jul vol is priced to 156.285 -- again, Jun is the month with the vol event. For a company with $150K in revenue but a market cap of over half a billion dollars, yeah, there's some risk.

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

This is trade analysis, not a recommendation.

Pre-Market/Post Market: 5-21-13

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Monday, May 20, 2013

Post Market Report: 5-20-13

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SunPower (SPWR) - Vol Diff Opens; Upside Skew Diverges in Front as Stock Moves 500+%

SPWR is trading $22.01, up 4.5% with IV30™ up 12.9%. The LIVEVOL® Pro Summary is below.

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SunPower Corporation is a vertically integrated solar products and services company that designs, manufactures and delivers solar electric systems worldwide for residential, commercial and utility-scale power plant customers.

I found this stock using a real-time custom scan I built that hunts for calendar spreads between the front two monthly expiries. Combine this skew with an enormous stock appreciation of late and we have a very interesting story.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 > 7
IV30™ GTE 30
Average Option Volume GTE 1,200

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

There are two phenomena that caught my eye here.

(1) Obviously, Jun vol is well elevated to Jul (the red curve is above the yellow curve)
(2) May vol shows an upside skew reflecting greater risk (potential) to the upside than to the downside. This is not normal skew, though for firms in the solar industry, it’s not “unusual.” The point is, the vol diff grows substantially large between the two months as we move to OTM calls.

The one-year SPWR 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).

Just look at that stock chart, it’s incredible. At point during the last year, this was a $3.71 stock and it’s now trading nearly 6-fold that price. The upside skew in May reflects this upside risk (potential). The overall vol pop today has put the IV30™ for SPWR in the 75th percentile on an annual basis, but if we look at the bottom chart (the vol char) we can see that in fact the red curve (IV30™) is right about in line with the two historical realized vol measures. In English, the implied, though I’s popping today, feels about “fair.”

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

Across the top we can see that May is priced to 89.66% while Jun is priced to 80.49%. But this isn’t a story about a 9 point vol diff from month-to-month. Check out that upside, for example the May/Jun 29 call spread. That shows ~17% vol diff. The option market reflects near-term upside risk in SPWR and from the stock chart, I can see why.

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Pre-Market/Post Market: 5-20-13

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Friday, May 17, 2013

Post Market Report: 5-17-13

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Solarcity (SCTY) - Stock Explodes, Vol Explodes -- One Makes Sense, the Other, Not So Much...

SCTY is trading $44.88, up 25.8% with IV30™ up 29.9%. The LIVEVOL® Pro Summary is below.

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SolarCity Corporation (SolarCity) is engaged in the design, installation and sale or lease of solar energy systems to residential and commercial customers, or sale of electricity generated by solar energy systems to customers.

This is a vol and price note on a stock that is exploding today. Let's start with the news:

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Wall Street’s major banks continue investing in the clean energy sector, with The Goldman Sachs Group, Inc. (GS) the latest to jump on the bandwagon. Goldman entered into a deal to finance approximately 110 megawatts (MW) rooftop solar power generators of Calif.-based SolarCity Corporation (SCTY). The combined lease financing agreement for homeowners’ rooftops is worth $500 million, and is the biggest deal to be announced in the U.S.

The agreement began in 2012 and extended as per its initial terms, to April-end. The deal has already helped achieve 26 MW of solar generation. Further, it is expected to generate an additional 158 MW as of May 10, 2013.

Source: ZACKS via Yahoo! Finance: Goldman Invests in Solar
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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 the price hit a low of $9.20 over the last year and as of this writing is trading nearly 500% of that level. The news today is big -- perhaps the most telling part is this reprise: " The combined lease financing agreement for homeowners’ rooftops is worth $500 million, and is the biggest deal to be announced in the U.S."

But it's actually the vol that has my attention, so let's turn to an isolated IV30™ chart, below.

We can see how elevated the implied got into the last earnings cycle (the blue "E" icon), and then the obligatory vol crush. The news today has pushed the vol right back to the peak ahead of earnings. Here's the thing... The news is out... It seems to be unambiguous. Goldie is a reputable name -- I don't think there is a doubt about the investment actually happening... Agree so far?

OK... Well, if you do... Then why is the vol exploding today? Or said differently, why is the vol at an all-time high? What is "unknown?" Yes, this investment seems to be valuation changing (duh), and yes, it's a big deal... but that's not what vol measures, that's what the equity price measures. I must say, this is a bit confounding to me. Then I looked to the Skew tab, and got more confused...

So Jun is elevated to Jul, that makes sense. But what is a little weird is.. the skew is normal. Yeah, it's weird to me that a firm up 400% in a year and 25% in a day with vol at all-time highs on the largest investment of its type ever from Goldie has no upside skew at all. No parabolic (two-tailed) risk reflected by the option market... Just normal, "hoe hum" skew. What?...

Finally, let's turn to the Options Tab.

Across the top we can see that Jun vol is priced to 126.90% and Jul is priced to 114.54%. Man that seems high... ya know, or not?...

FULL DISCLOSURE: I hold a small short vega position in SCTY in Jun.

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Pre-Market/Post Market: 5-17-13

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Thursday, May 16, 2013

Post Market Report: 5-16-13

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TIVO - Vol Rises ~100% Ahead of Patent Case vs GOOG; New Annual High – Something is Coming…

TIVO is trading $12.67, up 2.0% with IV30™ up 1.0%. The LIVEVOL® Pro Summary is below.

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TiVo Inc. (TiVo) a developer and provider of software and technology that enables the search, navigation, and access of content across sources, including linear television, on-demand television, and broadband video.

I found this stock using a real-time custom scan. This one hunts for elevated vols. TIVO does have earnings due out in the next few days, so the elevated vol isn’t a surprise, but it’s the trend and the level to which it has elevated that caught my eye… and I believe it will catch your eye once you get a look. We are well into annual high territory for IV30™.

The news it turns out, is simple: There is another patent infringement lawsuit going to trial and potentially settling in the Jun expiration cycle. This time, it's TiVO vs Google (Mobile Mobility). The prior cases TiVo has fought have all gone in their favor (DISH, AT&T and Verizon) totaling around $1 billion in damages oin to TiVo (Source: Deadline New York -- http://www.deadline.com/2012/12/tivo-google-motorola-mobility-patent-lawsuit/).

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated to its own annual history (at least in the 80th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

The one-year TIVO 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).

On the stock side we can see we can see a nice Y-O-Y return with the stock rising from $9.58 to now over $12.50. TIVO has such a long history it’s almost impossible to know where to begin. Perhaps the best (and shortest) place is just a summary. This company invented a technology that was earth shattering at the time – well ahead of any competitors and equally ahead of the rest of the world in terms of “what to do with it.” They are example 1A of how being the first to market is not necessarily the ideal strategy. To make a long story short, TIVO has been embroiled in numerous lawsuits (patent infringement ‘n stuff).

But let’s look to today – the vol in particular. I have included the one-year vol chart below (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Check out the rise in IV30™ (the red curve). On 4-18-2013 it was 40.63% and today it is nearly twice that level (in less than a month). This isn’t just about another earnings report. And how do I know that (or think that)? Check out the vol levels for each of the last four earnings cycles (the blue “E” icons), they reached a maximum of 58.76% and that was in May of last year. At 81% today – something is coming… and it’s big.

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

Across the top we can see the monthly vols are priced to 60.55% for May, 81.20% for Jun and 70.28% for Jun. It’s that Jun vol that is driving IV30™. If this trend continues, the implied could reach nearly 90% by the time earnings come out. Watch this one… closely…

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This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 5-16-13

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Wednesday, May 15, 2013

Post Market Report: 5-15-13

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Tesla (TSLA) - May Skew Stays Parabolic; Vol Diff Opens... And Some Stuff You May Not Have Known...

TSLA is trading $84.52, up 1.5% with IV30™ down 7.4%. The LIVEVOL® Pro Summary is below.

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Tesla Motors, Inc. is an electric vehicles and components manufacturer. The Company manufactures electric vehicles and electric vehicle powertrain components.

I just wrote about TSLA six days ago (May 9th). Here is that post:

Tesla (TSLA) - Earnings Explosion Spectacle Hides Vol Shift -- This is a New Company -- A Paradigm Shift is Complete

In all fairness, that one is a more compelling argument for the long run. This article surrounds the immediate-term; namely the next 2.5 trading days. This is a calendar spread note - and yes, I know how close we are to expiration, but you gotta see this vol in May.

One quick update before we get going... After I wrote the post on May 9th, I actually walked into a TSLA dealership and spoke to a salesman. He was a shareholder (or so he said). I have no idea if what he said was true, or if it is already common knowledge, but according to him the firm sold 2,600 cars last year, and this year they are going to break 20,000. The cheapest model is $70,000 and the most expensive is $113,00. They are at full capacity -- which according to him was 500 cars per week -- and every car made is to order so production = sales.

Further, at this point TSLA has one version -- one car -- in nine colors (or whatever). They are introducing a new model and... a right hand sided version of the current model (yeah, that would mean Europe). He also said the cars have ~470 HP -- or essentially, they are electric Lamborghinis with 300 miles to the battery charge which costs ~$9 when on absolute empty to recharge (in 8 hours).

Now onto the article at hand...

Let's start with the one-year Charts Tab 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 absolutely awesome price appreciation. At some pint during this year, TSLA was a $25 stock. It isn't anymore...

But anyway, this is a quick time spread note, so let's look at the Skew Tab.

I mean, it's pretty easy to see -- the red curve is well above the yellow curve (May is well above Jun).

Finally, let's turn to the Options Tab, below.

Easy enough -- look at the top of the Tab. May vol is priced to 123.62% while Jun is priced to 82.63%. That parabolic shape in the May skew is apparent in the OTM call vol pricing. The May 95 calls (for example), are priced to 135.5% vol or $0.55 bid. Whoa...

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

This is trade analysis, not a recommendation.

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Tuesday, May 21, 2013

Post Market Report: 5-21-13

Synta Pharma (SYNTA) - Vol Explodes to Event Due out Soon; But Skew is Highly Irregular.. What Does that Mean?

Pre-Market/Post Market: 5-21-13

Monday, May 20, 2013

Post Market Report: 5-20-13

SunPower (SPWR) - Vol Diff Opens; Upside Skew Diverges in Front as Stock Moves 500+%

Pre-Market/Post Market: 5-20-13

Friday, May 17, 2013

Post Market Report: 5-17-13

Solarcity (SCTY) - Stock Explodes, Vol Explodes -- One Makes Sense, the Other, Not So Much...

Pre-Market/Post Market: 5-17-13

Thursday, May 16, 2013

Post Market Report: 5-16-13

TIVO - Vol Rises ~100% Ahead of Patent Case vs GOOG; New Annual High – Something is Coming…

Pre-Market/Post Market: 5-16-13

Wednesday, May 15, 2013

Post Market Report: 5-15-13

Tesla (TSLA) - May Skew Stays Parabolic; Vol Diff Opens... And Some Stuff You May Not Have Known...

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