Vol Breaches Annual Low; Forward Looking Vol Agrees...Unlike BZH

PulteGroup, Inc. (PulteGroup) is a homebuilder in the United States. The Company’s subsidiaries engage primarily in the homebuilding business. PulteGroup also has mortgage banking operations, conducted principally through Pulte Mortgage LLC (Pulte Mortgage), and title operations.

I found this stock using a real-time custom scan. This one hunts for depressed vols; but for PHM (and other of the home builders), vol isn't just depressed, it's at annual lows.

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 PHM six-month 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 that awesome stock appreciation from $11.04 to now over $20 in just half a year. But ultimately, this is a vol note, so let's turn to an isolated one-year IV30™ chart, below.


We can see quite clearly how depressed the vol has gotten, and even after the vol crush yesterday (after earnings),the implied has continued to fall today. The 52 wk range in IV30™ was [38.27%, 71.57%], meaning that 37.24% number today is now a new annual low.

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

Across the top we can see the monthly vols are priced to 36.19%, 38.03% and 39.41%, respectively for Feb, Mar and Apr. While there is a slight increase in vol montonically as expiries get further out, it's a small increase. In English, the option market reflects the lowest risk in this firm over the last year and as of right now sustains that view for the near future. As a good comparison, see BZH which has a similar vol and stock pattern, but the monthly vols climb more for each expiry further out. Hmmm....

Disclosure: This is trade analysis, not a recommendation.

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