Lamar Advertising: Vol Rises In Non-Earnings Month

Lamar Advertising Company (LAMR) is an outdoor advertising company in the United States based on number of displays and has operated under the Lamar name.

I found this stock using a real-time custom scan I built in Livevol Pro. This one hunts for calendar spreads between the front two monthly expiries. The fascinating phenomenon here is that the vol is elevated in the front, but the earnings are in the back. Also interesting is the way in which IV30™ is behaving – it’s telling us that earnings are due out now... but they aren’t?...

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

The goal with this scan is to identify back months that are cheaper than the front by at least 10 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume) and enough strikes to spread and thus a minimum stock price. I also require a minimum vol level in order to avoid any boring ETFs (or whatever).

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


We can see quite easily how the vol for every strike in Apr lies above May. Also, we can see how that vol diff gaps open to the downside. In English, the option market reflects greater risk in April than May, and even greater risk to the downside than the upside. But, here are the dates of the last several earnings around this time of year:

(1) May 3, 2012
(2) May 4, 2011
(3) May 6, 2010

So, earnings should be due out in May, not April. The last earnings release for LAMR was Feb 27, 2013, making an Apr release highly unlikely... right?

The one-year LAMR 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 see a very impressive price appreciation from below $25 in June of 2012 to now nearly double that. Again, the option market reflects greater risk to the downside in the near-term. Compelling and confusing...

But this is a vol note, so let’s isolate the IV30™ over the last year below.


We can see the how the implied spikes into each earnings announcement (the blue “E” icon). Now look at the IV30™ as of right now… It looks like an earnings announcement is coming just by the shape (spike) of the implied. But it isn’t. Hmm...

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

Across the top we can see the monthly vols are priced to 56.21% for Apr and 45.68% for May (and thus the trigger for the custom calendar spread scan). Note that while the ATM vol diff is ~10 vol points, if you look to the Apr/May 42 put spread (for example), all of a sudden we see a 22 point vol diff. Again, the option market reflects substantially higher downside risk in the near-term than in May (with earnings).

Disclosure: This is trade analysis, not a recommendation.

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