Alphabet Inc (NASDAQ:GOOGL) Risk Hits A Deteriorated LevelDate Published: 2017-01-26
We're going to look at a proprietary risk rating for the next 30-days built by Capital Market Laboratories (CMLviz) based on a large number of interactions of data points, many of which come directly from the option market for Alphabet Inc (NASDAQ:GOOGL) .
In the "Why This Matters" section at the end of this article on Alphabet Inc (NASDAQ:GOOGL) we're going to take a step back and show in great specificity that there is actually a lot less "luck" in successful option trading than many people know. The whole concept of an "option trading expert" is vastly over complicated and we'll talk about how superior returns are earned.
But first, let's turn back to GOOGL and the company's risk rating:
We also take a peek at the implied vol for the Technology ETF (XLK), our broad based proxy for GOOGL.
|S&P 500 IV30||8.8%|
|Nasdaq 100 IV30||10.86%|
|GOOGL HV 30||11.75%|
|GOOGL Current IV30||21.51%|
|52 Week Low IV30||12.49%|
|52 Week High IV30||38.88%|
The risk as reflected by the option market has hit a deteriorated level relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($819.10, $903.90) within the next 30 calendar days.
While the option market risk rating is on the low side, we note that companies in this situation are still susceptible to sudden stock move risk, it's simply the probability of that large stock move is depressed. Buyers of options and volatility may find these prices more attractive than at other times.
GOOGL OPTION MARKET RISK
The IV30® is the risk reflected by the option market in the stock price for the next 30 calendar days -- it's forward looking. Alphabet Inc shows an IV30 of 21.5%, which is a deteriorated level for the company relative to its past.
The option market for GOOGL has shown an IV30 annual low of 12.5% and an annual high of 38.9%, meaning that GOOGL is at the 34% percentile right now. Here's a table of the data before we dig into the risk rating further.
The option market reflects less risk in the next 30 calendar days for Alphabet Inc (NASDAQ:GOOGL) than on average. Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 11.75%.
We have an unusual situation now where the IV30 is depressed relative to the past, but even with that risk pricing, the option market reflects the likelihood of a greater stock movement in the next 30-days than the stock has realized in the last 30-days. Let's turn to a chart to see what's going on.
Alphabet Inc Risk Rating
The GOOGL risk rating is at 2, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 2 rating are:
↪ The IV30 is below the annual average.
↪ The IV30 is below 30%.
↪ The HV30 is below the 20th percentile.
↪ The HV30 is below 30%.
↪ The IV30 is above the HV30.