TiVo:Ahead Of Patent Case vs GOOG; New Annual High – Something Coming

TiVo Inc. (TIVO) a developer and provider of software and technology that enables the search, navigation, and access of content across sources, including linear television, on-demand television, and broadband video.

I found this stock using a real-time custom scan. This one hunts for elevated vols. TIVO does have earnings due out in the next few days, so the elevated vol isn’t a surprise, but it’s the trend and the level to which it has elevated that caught my eye… and I believe it will catch your eye once you get a look. We are well into annual high territory for IV30™.

The news it turns out, is simple: There is another patent infringement lawsuit going to trial and potentially settling in the Jun expiration cycle. This time, it's TiVO vs Google (Mobile Mobility). The prior cases TiVo has fought have all gone in their favor (DISH, AT&T and Verizon) totaling around $1 billion in damages oin to TiVo (Source: Deadline New York -- http://www.deadline.com/2012/12/tivo-google-motorola-mobility-patent-lawsuit/).

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200


The goal with this scan is to identify short-term implied vol (IV30™) that is elevated to its own annual history (at least in the 80th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

The one-year TIVO 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 can see we can see a nice Y-O-Y return with the stock rising from $9.58 to now over $12.50. TIVO has such a long history it’s almost impossible to know where to begin. Perhaps the best (and shortest) place is just a summary. This company invented a technology that was earth shattering at the time – well ahead of any competitors and equally ahead of the rest of the world in terms of “what to do with it.” They are example 1A of how being the first to market is not necessarily the ideal strategy. To make a long story short, TIVO has been embroiled in numerous lawsuits (patent infringement ‘n stuff).

But let’s look to today – the vol in particular. I have included the one-year vol chart below (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Check out the rise in IV30™ (the red curve). On 4-18-2013 it was 40.63% and today it is nearly twice that level (in less than a month). This isn’t just about another earnings report. And how do I know that (or think that)? Check out the vol levels for each of the last four earnings cycles (the blue “E” icons), they reached a maximum of 58.76% and that was in May of last year. At 81% today – something is coming… and it’s big.

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

Across the top we can see the monthly vols are priced to 60.55% for May, 81.20% for Jun and 70.28% for Jun. It’s that Jun vol that is driving IV30™. If this trend continues, the implied could reach nearly 90% by the time earnings come out. Watch this one… closely…

Disclosure: This is trade analysis, not a recommendation.

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