Expedia: Vol At Multi-year Highs After Consecutive Earnings Blow-Outs
Ophir Gottlieb | Oct 24, 2012 05:43AM ET
Expedia, Inc. (EXPE) is an online travel company. As of December 31, 2011, the Company's portfolio of travel brands featuring supply portfolio, including over 145,000 hotels in 200 countries, 300 airlines, packages, rental cars, cruises, as well as destination services and activities
This is an elevated vol note -- a pretty simple one in the reasoning, a pretty compelling one in the reasoning as well. EXPE has earnings due out 10-25-2012 AMC -- or in English, in two days.
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).
On the stock side we can see a huge run up over the last half-year, with the stock rising from $31.39 to now over $53, or more than 70%. Looking carefully at that stock chart we can see two earnings results (the blue "E" icon). On both of those days, the stock gapped up on the news -- i.e. the market liked it a lot. The 52 wk range in EXPE price is [$25.19, $60.29].
On the vol side, it's fascinating to note that on the first earnings blow out on 4-26-2012 (AMC), the implied only rose to 35.34% ahead of the announcement. Then, on the next earnings report, the IV30™ rose to 67.80% just before the announcement. That's nearly a doubling in vol, yet the stock still moved more than the implied. We are now just days away from the next earnings release and the IV30™ is sitting above 70% -- and that is not just an annual high, but a multi-year high. the 52 wk range in IV30™ was [23.31%, 69.55%] -- of course, we're well over that now.
Rater than show the skew, which is gonna look exactly as you would expect, the front is elevated substantially to the back-- let's just turn to the Options Tab.
We can see across the top how the Nov options are priced to 73.79% -- it's odd but the vol might actually drop slightly tomorrow if vega sellers come in at these levels. Of course, the standard expectation would be even higher vol as the earnings date approaches. Note that the ATM strangle (50/55) is priced $5.80 x $6.10, or, in English, a stock price in between [$44, $60] is kind of.... the norm... Hmmm...
Get The News You Want
Disclosure: This is trade analysis, not a recommendation.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.