Ciena: Low Volume As Stock Rises

Ciena Corporation (Ciena) is a provider of communications networking equipment, software and services that support the transport, switching, aggregation and management of voice, video and data traffic.

This is a vol note in a stock that has been rising of late. Specifically, CIEN has triggered the low vol custom scan. The details of the filters are included below.

Scan Details
Stock Price GTE $10
IV30™ GTE 25
IV30™ Percentile LTE 10
IV30™ - HV20™ LTE -10
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed to the recent stock movement (HV20™) was well as its own history. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume) and minimum level of vol so the examination is more interesting.

--- ANALYSIS ---

Let’s start with the Charts Tab (six months). 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 an impressive move up of late, spurred by an earnings release. On 5-25-2012, CIEN was trading $11.84. As of this writing the stock is up 34% since that date. A chunk of that move occurred on 5-31-2012 after earnings were released BMO. That day the stock rose from $11.88 to $13.55 or 14%. The 52 wk range in stock price for CIEN is [$9.89, $18.79], but that high was hit in Jul of 2011 (so, nearly a year ago).

On the vol side, we can see how much the implied has fallen after earnings. On 5-20-2012, IV30™ was trading at 78.21%. As of this writing the vol is now down more than 40% and is well below both the short-term and long-term historical realized vols. Specifically:

IV30™: 46.51%
HV20™: 65.25%
HV180™: 57.29%

The 52 wk range in IV30™ for CIEN is [40.80%, 101.58%], putting the current level in the 9th percentile (annual).

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


We can see a rather pretty skew shape across both months. The vol levels are so similar due to the fact that there is no known vol event (like earnings) in either of these months. CIEN’s earnings cycles hit in early Sep (so outside of both of these months). I do note the slightly higher vol in the OTM puts for Jul relative to Aug.

--- SUMMARY --

Finally, let’s turn to the Options Tab, for completeness.

I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. Across the top we can see the monthly vols are priced to 46.51%, 48.16% and 55.64% for Jul, Aug and Oct, respectively. Given that the realized movement of the stock is elevated relative to the current implied while the implied is also nearing an annual low and add some uncertainty with the Fed and Europe (‘n stuff), this is a compelling name to analyze.

This is trade analysis, not a recommendation.