Norfolk Southern (NSC) - Depressed Vol into Earnings; Vol "Agnosticism?"
Ophir Gottlieb | Apr 06, 2012 05:04AM ET
Norfolk Southern Corporation (Norfolk Southern) is a Virginia based company that controls a railroad, Norfolk Southern Railway Company.
This is a vol note with earnings approaching. 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).
Keeping in mind that this is a 24% vol stock, look to the stock portion. The ride has been a bit bumpy over the last six months. We can see an earnings gap on 10-27-2011, when the stock went from $69.77 to $75.16. Two quarters prior to that, the stock gapped as well, going from $68.41 to $73.87 (4-28-2011).
Looking to the vol portion, we can see that the implied has been dipping for the last six months. The 52 wk range in IV30™ is [19.35%, 48.31%], putting the current level in the 15th percentile. While we see depressed vol right now, note that the next earnings release for NSC is confirmed by Livevol® for 4-24-2012 (AMC).
Let’s turn to the Skew Tab.
We can see a normal skew shape across the front expiries. Apr vol is slightly depressed to May (with earnings), as is Jun. I do note that the ATM vols are quite similar across the expiries – odd given the earnings event and its certainty (in terms of date).
Finally, let’s turn to the Options Tab, for completeness.
I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. Looking across the top of the tab, we can see 22.34%, 25.54% and 24.82% for the Apr, May and Jun expiries, respectively. The 52 wk range in stock price for NSC is [$56.86, $77.99], so the current level is pretty much in the middle. Being totally vol agnostic, it feels like a 50-50 bet that the stock moves big on earnings given the last four earnings cycles... but of course, there's no such thing as vol agnosticism trading options.
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