Gentex Corp. (GNTX), Trending Stock Report

Gentex Corp. (GNTX) showed up on our list of compressed stocks this morning. The company makes auto-dimming mirrors for the automotive industry and smoke alarms. You may not have heard of the company, but you may never forget the symbol after trading one of its compression signals.

GNTX has a stellar history of making huge moves after a compression signal. Just look at the probability cones from previous signals below. The cones were drawn based on an expected volatility of 21.18, which is the at-the-money volatility of the September options.

Volatility expectations and options prices are relatively low and the stock has a history of making at least a one standard deviation move after a compression signal. However, 4 out of the last 5 signals the stock made a two standard deviation move or more.

Also, by going out to the September expiration we will have an earnings announcement scheduled for July 26^th that could be a catalyst for a big move in the stock price.

In this time series chart, you can see that the 3-month implied volatility (the lower green line) recently dipped below 20 for the first time in 10 years. Since implied volatility is also a measure of relative options prices, this suggests that options expiring in 3 months are as cheap as they have been in the last 10 years.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of GNTX’s stock price over the past two years. You can see that the actual behavior (the blue histogram) made big moves up or down more frequently than modeled options prices currently expect. This tells us that current options prices are inexpensive relative to the past movement of the stock.

This Volatility Cone graph is showing us that volatility expectations (the yellow dots) are all below the 2-year average historical volatility. To learn more about the Volatility Cone, click here. This graph confirms that current options prices are relatively cheap.

GNTX stock price is compressed. The stock has a history of making huge moves after a compression signal. By going out to September options expiration, we will have an earnings report that could be a catalyst for a big move in the stock price. This is an option buying opportunity.

Be sure to read the ODDS Online Daily Trade Idea report to get the details of our trade ideas for buying GNTX options today.