Option Market: Fortress Biotech Inc Risk Hits An Elevated Level

Fortress Biotech Inc (NASDAQ:FBIO) Risk Hits An Elevated 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 Fortress Biotech Inc (NASDAQ:FBIO) .

In the "Why This Matters" section at the end of this article on Fortress Biotech Inc (NASDAQ:FBIO) 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 FBIO and the company's risk rating:

We also take a peek at the implied vol for the Health Care ETF (XLV), our broad based proxy for FBIO.

S&P 500 IV30     8.8%
Nasdaq 100 IV30     10.86%
XLV IV30     11.81%

FBIO HV 30     88.12%
FBIO Current IV30     94.41%
52 Week Low IV30     73.53%
52 Week High IV30     167.89%

The risk as reflected by the option market has hit an elevated level relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($1.90, $2.90) 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. Fortress Biotech Inc shows an IV30 of 94.4%, which is an elevated level for the company relative to its past.

The option market for FBIO has shown an IV30 annual low of 73.5% and an annual high of 167.9%, meaning that FBIO is at the 22% percentile right now. Here's a table of the data before we dig into the risk rating further.

Current IV30    
Low IV30    
High IV30   
94.4% 73.5% 167.9%

The option market reflects less risk in the next 30 calendar days for Fortress Biotech Inc (NASDAQ:FBIO) than on average. But, even though the IV30 percentile is below 50, other critical volatility measures that we discuss below point to substantially elevated risk. Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 88.12%.

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.
Note how similar the forward risk for Fortress Biotech Inc is priced (94.4%) compared to what happened just in the last 30-days (88.1%).

Fortress Biotech Inc Risk Rating
The FBIO risk rating is at 4.5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 4.5 rating are:

The IV30 is below the annual average.
The IV30 is above 90%, which is very elevated.
The HV30 is above the 80th percentile.
The HV30 is above 85%.
The stock has moved just -1.6% over the last 3-months which does indicate some depressed risk.