Fortress Biotech Inc (NASDAQ:FBIO) Stock Volatility Hits An Elevated LevelDate Published: 2017-03-24
Stock Risk Alert
Before we cover the full analysis we make a quick alert here that Fortress Biotech Inc (NASDAQ:FBIO) has seen its stock price whip around at an elevated level. We'll go through the details below -- but that's the lede -- the stock has been moving and the market's reaction is like a yellow post it note on the face of the ticker that reads "this is not equilibrium" with an HV20 of 55.92% verus the HV20 of the S&P 500 at 8.56%.
Another bit to this risk alert, which we cover in the article, is that while the historical volatility may be an elevated level (the stock has been whipping around), the real question that needs to be answered for option traders is not if the HV20 is high, but rather if the implied volatility that is priced for the next 30-days accuratley reflects what we're about to see in the stock for the next month.
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This is a proprietary realized volatility rating created by Capital Market Laboratories (CMLviz) based on a large number of data interactions for Fortress Biotech Inc (NASDAQ:FBIO) . 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 Fortress Biotech Inc (NASDAQ:FBIO) , 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 FBIO. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.
FBIO Recent Stock Volatility
Stock volatility using proprietary measures has hit an elevated level.
Fortress Biotech Inc is a small cap biotechnology-pharmaceutical company with very small revenue. This reality, in and of itself, makes FBIO susceptible to excessive risk as the stock may vascillate based on drug trial results, FDA decisions, new government pricing rules, and especially takeover rumors.
We also note that FBIO has negative GAAP earnings in the last year which makes it ever more susceptible to stock volatility. 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 biotechnology sector volatility is (the pink curve) relative to the S&P 500.
Let's take a deep dive into some institutional level volatility measures for Fortress Biotech Inc (NASDAQ:FBIO) .
Fortress Biotech Inc Stock Performance
FBIO is up +46.0% over the last three months and up +16.1% over the last six months. The stock price is up +15.3% over the last year. The current stock price is $3.46.
FBIO Step 1: Stock Returns
↪ The 3-month stock return of +46.0% has a large impact on the stock volatility rating for FBIO.
↪ The noteworthy difference between the 3-month and 6-month stock returns has a meaningful impact on the stock volatility rating for FBIO.
FBIO 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 Fortress Biotech Inc (NASDAQ:FBIO) and how the day-by-day stock historical volatilities have impacted the rating:
↪ The HV20 of 59.8% is in the middle ground, neither elevated nor depressed, so in this case the raw HV20 number has no impact on FBIO's volatility rating.
FBIO Step 3: Fortress Biotech Inc HV20 Compared to Indices
* The HV20 for FBIO is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.
* The HV20 for FBIO is substantially larger than that for the Health Care ETF (XLV) which raises the volatility rating.
Here is summary data in tabular and chart format.
| S&P 500
| NASDAQ 100
FBIO Step 4: Daily Volatility Percentiles and Highs
We also examine the annual high of the HV30 in our rating.
↪ The 52 week high in HV30 for FBIO is 89.0%, which is high and has an upward impact on the stock volatility rating.
Here is summary data in tabular and chart format.
Final Stock Volatility Percentile Level: FBIO
The final evolution of the volatility rating for Fortress Biotech 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.
Fortress Biotech Inc Realized Volatility Percentiles