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Facebook Inc Stock Volatility Hits A Rock Bottom Low




Facebook Inc (NASDAQ:FB) Stock Volatility Hits A Rock Bottom Low

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PREFACE
This is a proprietary realized volatility rating created by Capital Market Laboratories (CMLviz) based on a large number of data interactions for Facebook Inc (NASDAQ:FB) . We examine the little used gem of daily stock volatility over a 20-day and 30-day trading period, as well as comparisons to the last year and the actual stock returns over the last three- and six-months and the S&P 500 and Nasdaq 100 indices.


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As a heads up, in the "Why This Matters" section at the end of this article on Facebook Inc (NASDAQ:FB) , we're going to take a step back and show really clearly that there is actually a lot less "luck" in successful option trading than most people are aware of. This idea of an "option trading expert" is vastly over complicated so those with the information advantage can continue to profit at the expense of the rest.

But before that, let's turn back to FB. This is a four step process for computing the realized volatility risk. Here we go.

FB Recent Stock Volatility


Rating
Stock volatility using proprietary measures has hit a tumbling low level.

Note
Even though Facebook Inc is a legitimate large cap, just the fact that it is a technology company makes FB susceptible to elevated risk due to issues surrounding unrest in the European Union and patent fights as well as an unending need to drive innovation forward through proper research and development. Here is a rolling annual volatility chart of the biotech index (IBB) versus the Nasdaq 100 and the S&P 500. Note how elevated the technology sector volatility is (the yellow curve) relative to the S&P 500.



While stocks with FB's profile see a short-term quiet period, this is also one of those times when a shake out volatility move could be on the horizon. To that point, we do note that FB is showing unusally low volatility in the last month relative to its past. Let's take a deep dive into some institutional level volatility measures for Facebook Inc (NASDAQ:FB) .

Facebook Inc Stock Performance
FB is up +15.9% over the last three months and up +8.9% over the last six months. The stock price is up +26.2% over the last year. The current stock price is $139.72.

FB Step 1: Stock Returns
The one-year stock return does not impact the volatility rating since we are looking at a shorter time horizon. However, the rating does examine the 3-month returns and the absolute difference between the 3-month and 6-month returns.

  The 3-month stock return of +15.9% has a small impact on the stock volatility rating for FB.
  The small difference between the 3-month and 6-month stock returns does not impact the stock volatility rating for FB.

FB Step 2: Daily Stock Volatility Level
The HV30® takes the stock's day to day historical volatility over the last 30-days and then annualizes it. The HV20 looks back over just 20-days -- a shorter time period. Here is the breakdown for Facebook Inc (NASDAQ:FB) and how the day-by-day stock historical volatilities have impacted the rating:

  The HV20 of 9.6% is especially low and has a large downward impact on FB's volatility rating.


FB Step 3: Facebook Inc HV20 Compared to Indices
* The HV20 for FB is greater than that for both the S&P 500 and the NASDAQ 100 which has a small impact on the volatility rating.

* The HV20 for FB is larger than that for the Technology ETF (XLK) which raises the volatility rating a little.

Here is summary data in tabular and chart format.

           FB
           HV20    
   S&P 500
HV20
   NASDAQ 100
HV20   
   XLK
HV20   
           9.6%    6.93%    6.01%    6.7%

FB Step 4: Daily Volatility Percentiles and Highs

We also examine the annual high of the HV30 in our rating but in this case the 52 week high in HV30 for FB is 31.6%, which is not enough to impact the stock volatility rating.

Here is summary data in tabular and chart format.

           FB
           HV20    
   FB
HV30
   FB
HV30 High   
           9.6%    12.8%    31.6%

Final Stock Volatility Percentile Level: FB
The final evolution of the volatility rating for Facebook Inc is a comparison of the HV30 value relative to its past, which is neatly summarized in the percentile -- a scoring mechanism that goes from a low of 1 to a high of 100.

  The HV30 percentile for Facebook Inc is 7%, which means the stock has seen very low volatility in its price movement relative to its own past and that has a dampening impact on the stock volatility rating.

Facebook Inc Realized Volatility Percentiles