Terex (TEX) - Depressed Vol, Earnings Date Ambiguity Priced in Skew
Ophir Gottlieb | Dec 22, 2011 02:57AM ET
Terex Corporation (Terex) is a diversified global equipment manufacturer of a variety of machinery products. Terex is focused on delivering customer-driven solutions for a range of commercial applications, including the construction, infrastructure, quarrying, mining, shipping, transportation, refining, energy and utility industries.
This is another vol note examining depressed implied to historical realized vol and again, this name has earnings approaching. Let's start with 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).
We can see the stock was trading near $30 and is down ~60% to $13.36 in less than six months. On the vol side, we can see how the implied has been diverging from the short-term historical realized vol (HV20) since late Nov. The divergence is more than implied simply falling, but it's in fact the coincidence of implied dropping as the HV20 has risen. In English, the implied vol has been dropping as the stock's actual movement has been rising. As of right now that vol diff is quite large. Specifically:
IV30™: 55.15
HV20: 92.12
HV180: 72.58
I'll get back to that little yellow line I drew in the vol chart, later. For now, let's turn to the Skew Tab, below.
We can see how Jan vol is depressed relative to Feb and Apr. A part of Jan's lower vol is the inclusion of the Holiday season. But it's not Jan that interests me. The last four years, TEX earnings have been announced on:
2-9-2011
2-17-2010
2-11-2009
2-20-2008
Feb expiry this year is 2-18-2011. Tricky... Even more tricky, check out the earnings dates for the cycle before the Feb release:
10-20-2010
10-21-2009
10-22-2008
10-24-2007
And this year, earnings were released 10-26-2011. Earnings tend to be on Wednesdays for TEX. It seems like the next earnings cycle could be released on either Wednesday 2-15-2012 or Wednesday 2-22-2012. I believe it's that ambiguity that has Feb and Apr options priced to nearly identical vol.
Let's turn to the Options Tab for completeness.
Get The News You Want
We can see Jan is priced to 55.15 vol, while Feb is priced to 63.91 and Apr to 63.50. Back to the Charts Tab -- that ~63iv level is the yellow mark on the chart. Looking back to the vol comps, we can see that even that level is depressed to the HV20 and HV180. Of course, we don't know what those measures will be in two months, but for now, it's... interesting.
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