Option Market: Apple Inc Risk Hits A Deteriorated Level

Apple Inc (NASDAQ:AAPL) Risk Hits A Deteriorated 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 Apple Inc (NASDAQ:AAPL) .

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But first, let's turn back to AAPL 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 AAPL.

S&P 500 IV30     9.55%
Nasdaq 100 IV30     10.42%
XLK IV30     10.63%

AAPL HV 30     18.69%
AAPL Current IV30     14.29%
52 Week Low IV30     13.64%
52 Week High IV30     32.34%

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 ($134.90, $144.00) 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.

The IV30® is the risk reflected by the option market in the stock price for the next 30 calendar days -- it's forward looking. Apple Inc shows an IV30 of 14.3%, which is a deteriorated level for the company relative to its past.

The option market for AAPL has shown an IV30 annual low of 13.6% and an annual high of 32.3%, meaning that AAPL is at the 3% percentile right now. Here's a table of the data before we dig into the risk rating further.

Current IV30    
Low IV30    
High IV30   
14.3% 13.6% 32.3%

The option market reflects extremeley less risk in the next 30 calendar days for Apple Inc (NASDAQ:AAPL) than on average.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 18.69%.

We have a situation now where the IV30 is extremely depressed relative to the past and that has resulted in a risk pricing that reflects less stock movement in the next 30-days than it has seen in the last 30-days. Let's turn to a chart to see what's going on.
Note how much lower the forward looking risk for Apple Inc is priced (14.3%) compared to what happened just in the last 30-days (18.7%).

Apple Inc Risk Rating
The AAPL risk rating is at 1.5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 1.5 rating are:

The IV30 is below the 20th percentile.
The IV30 is below 30%.
The HV30 is above the annual average.
The HV30 is below 30%.
The IV30 is below the HV30.
The stock has moved +20.4% over the last 3-months which does indicate some elevated risk.