YELP: Vol Reaches All-Time Low... Really?

Yelp (YELP) connects people with local businesses - users have contributed over 36 million cumulative reviews of almost every type, from restaurants, boutiques and salons to dentists, mechanics, plumbers and more. The information these reviews provide is valuable for consumers and businesses alike. Approximately 86 million unique visitors the company website, and themobile application was used on approximately 9.2 million unique mobile devices, on a monthly average basis during the quarter ended December 31, 2012.

I found this stock using a real-time custom scan. This one hunts for depressed vols.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile 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 its own annual history (at most in the 10th 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 stock chart for YELP is included (below).

We can see it has been a rather tight trading range for an IPO that actually has a fair amount of controversy surrounding it (pay for ratings accusations). It looks like it first traded at $22.01 and it's just $0.08 below that opening print. The 52 wk range in stock price is [$14.10, $31.96]. But this is a vol note, so let's look at the IV30™ in isolation, below.

We can see the vol crush off of earnings and then over the last few trading sessions, a continued drop in the implied. The IV30™ has fallen so far that it is now at an all-time low. Really?Is the market that confident in the stability of an Internet IPO that rates places? Apparently it is.

Let's look at the Options Tab:


Across the top we can see the March vol is priced to 49.45% with Apr priced to 51.74%. The vol rises into May as another earnings release is due. Having said that, the last earnings release was sort of a non-event for the stock price.

Disclosure: This is trade analysis, not a recommendation.

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