Alphabet Inc (NASDAQ:GOOGL) Risk Points versus Technology (XLK)Date Published: 2017-03-22
This is a scatter plot analysis of the critical risk points from the option market for Alphabet Inc (NASDAQ:GOOGL) compared to its own past and the Technology ETF. In order to examine the forward looking risk for Alphabet Inc (NASDAQ:GOOGL) the next 30-days, we must look to the option market.
Now, before we dive into the analysis on GOOGL, we make one critical note since we're talking about options:
Option trading isn't about luck -- this three minute video will change your trading life forever: Option Trading and Truth
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.
But that's at the end, now let's jump back into the risk point charting and number crunching for Alphabet Inc (NASDAQ:GOOGL) . We start by noting that GOOGL is in the information technology sector which means along with some other industries we also compare the company to the closest match we could find, which was the Technology ETF (XLK) as a proxy for Alphabet Inc.
We have highlighted the IV30® for XLK and for GOOGL in the table below.
|CONTEXT: THE INDICES|
|S&P 500 (SPY)||IV30||10.4%|
|Nasdaq 100 (QQQ)||IV30||10.86%|
|Technology ETF (XLK)||IV30||11.49%|
|Alphabet Inc (NASDAQ:GOOGL)|
|GOOGL 52 Week Low||IV30||10.62%|
|GOOGL 52 Week High||IV30||30.95%|
|Alphabet Inc Implied Risk Scatter Plot|
|(a new risk chart, built for option traders)|
Scatter Plot Risk Legend
The blue point is the current 30-day implied volatility for Alphabet Inc.
The black point is the current 30-day implied volatility for the Technology ETF (XLK).
The red point is the 52 week low in IV30® for Alphabet Inc.
The green point is the 52 week high in IV30® for Alphabet Inc.
The various other scatter plot points in the middle give us risk context outside of the information technology sector.
The IV30® is the risk reflected by the option market in the stock price for the next 30 calendar days.
* We can see that the risk as reflected by the option market for the next 30-days for Alphabet Inc is in between the indices we have charted but is above the Technology ETF (XLK), which we use as a proxy for Alphabet Inc.
* We can further see that the current IV30 for Alphabet Inc of 13.99% is closer to the annual low of 10.62% than the annual high of 30.95%. Simply stated, this means that the option market is pricing less risk than the average over the past year.
* For some context, we note that the annual range in IV30® for the Technology ETF is between [9.36%, 21.75%] while Alphabet Inc has had a range of [10.62%, 30.95%].
Get this same analysis on any ticker here:
A New Kind of Risk Point Chart
This is chart was developed for the trader. It allows us to easily see where the forward looking risk for Alphabet Inc (NASDAQ:GOOGL) lies relative to the last year, and the various major stock groupings and the Information Technology sector without using time series data, which can confuse the information.
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.