Risk Alert In Option Market Fortress Biotech Inc Implied Price Swing Hits An Extreme High

Risk Alert in Option Market: Fortress Biotech Inc Implied Price Swing Hits An Extreme High

Fortress Biotech Inc (NASDAQ:FBIO) Risk Hits An Extreme High

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Risk Alert: Before we dive into any analysis we simply note that Fortress Biotech Inc (NASDAQ:FBIO) risk is at an extremely elevated level. We'll detail it below -- but that's the lede -- the option market is flashing a neon sign that reads "risk is here" with an IV30 of 86.39% verus the IV30 of the S&P 500 at 10.69%.

One thing to note, which we cover in the article, is that while implied volatility may be high, the real question that needs to be answered for option traders is not if the impled vol is high, but rather if the realized volatility that is coming in the next 30 days will be higher or lower than the option market is pricing.

To skip ahead of this risk alert and see if buying or selling options has been a winner in Fortress Biotech Inc, you can go here: Geting serious about option trading.

This is a proprietary risk rating and risk alert system that looks forward for the next month -- or really 30 days to be exact -- and that includes weekends. The system is based on multiple interactions of data points, many of which come directly from the option market for Fortress Biotech Inc (NASDAQ:FBIO) . The creator of this model is Capital Market Laboratories (CMLviz.com).

Option trading isn't about luck -- this four 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 Fortress Biotech Inc 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     10.69%
Nasdaq 100 IV30     11.95%
XLV IV30     11.6%

FBIO HV 30     59.99%
FBIO Current IV30     86.39%
52 Week Low IV30     73.53%
52 Week High IV30     167.89%

The risk as reflected by the option market has hit an extreme high relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($2.70, $4.00) 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 86.4%, which is an extreme high 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 14% percentile right now. Here's a table of the data before we dig into the risk rating further.

Current IV30    
Low IV30    
High IV30   
86.4% 73.5% 167.9%

The implied stock swing risk from the option market is significantly tighter in the next 30 calendar days for Fortress Biotech Inc (NASDAQ:FBIO) than it has been on average for the year. But, even though the IV30 percentile is below 50, other critical volatility measures that we discuss below point to extreme stock swing price risk.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 59.99%.

We have an unusual situation now where the IV30 is substantially depressed relative to the past, but even with that risk pricing, the option market reflects the likelihood of more stock movement in the next 30-days than it has in the last 30-days. Let's turn to a chart to see what's going on.
Note how much higher the forward looking stock swing price risk for Fortress Biotech Inc is priced (86.4%) compared to what happened just in the last 30-days (60.0%).

Fortress Biotech Inc Risk Rating
The FBIO risk rating is at 5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 5 rating are:

The IV30 is below the 20th percentile.
The IV30 is above 80%.
The HV30 is below the annual average.
The IV30 is above the HV30.
The stock has moved +23.2% over the last 3-months which does indicate some elevated risk.