Option Market First Bancorp Risk Hits An Amplified Level

Option Market: First Bancorp Risk Hits An Amplified Level

First Bancorp (NYSE:FBP) Risk Hits An Amplified Level

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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 First Bancorp (NYSE:FBP) .

In the "Why This Matters" section at the end of this article on First Bancorp (NYSE:FBP) 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 FBP and the company's risk rating:

We also take a peek at the implied vol for the Financials ETF (XLF), our broad based proxy for FBP.

S&P 500 IV30     8.7%
Nasdaq 100 IV30     10.85%
XLF IV30     14.53%

FBP HV 30     36.84%
FBP Current IV30     47.39%
52 Week Low IV30     40.85%
52 Week High IV30     138.87%

The risk as reflected by the option market has hit an amplified level relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($6.20, $7.70) within the next 30 calendar days.

The IV30® is the risk reflected by the option market in the stock price for the next 30 calendar days -- it's forward looking. First Bancorp shows an IV30 of 47.4%, which is an amplified level for the company relative to its past.

The option market for FBP has shown an IV30 annual low of 40.9% and an annual high of 138.9%, meaning that FBP is at the 7% percentile right now. Here's a table of the data before we dig into the risk rating further.

Current IV30    
Low IV30    
High IV30   
47.4% 40.9% 138.9%

The option market reflects extremeley less risk in the next 30 calendar days for First Bancorp (NYSE:FBP) than on average. Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 36.84%.

We have an unusual situation now where the IV30 is extremely depressed relative to the past, but even with that risk pricing, the option market reflects the likelihood of more stock movement in the next 30-days than it has in the last 30-days. Let's turn to a chart to see what's going on.
Note how much higher the forward looking risk for First Bancorp is priced (47.4%) compared to what happened just in the last 30-days (36.8%).

First Bancorp Risk Rating
The FBP risk rating is at 3.5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 3.5 rating are:

The IV30 is below the 20th percentile.
The IV30 is above 40%.
The HV30 is below the 20th percentile.
The IV30 is above the HV30.
The stock has moved +28.4% over the last 3-months which does indicate some elevated risk.