Bel Fuse Inc (NASDAQ:BELFB) Realized Volatility Hits An Escalated LevelDate Published: 2017-04-13
Stock Risk Alert
Before we cover the full analysis we make a quick alert here that Bel Fuse Inc (NASDAQ:BELFB) 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 47.3% verus the HV20 of the S&P 500 at 6.11%.
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.
To jump forward and examine if owning or shorting options has been a positive trade in Bel Fuse Inc, you can go here: Getting serious about option trading.
This is a proprietary realized volatility rating created by Capital Market Laboratories (CMLviz) based on a large number of data interactions for Bel Fuse Inc (NASDAQ:BELFB) . 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.
Option trading isn't about luck -- this four minute video will change your trading life forever: Option Trading and Truth
As a heads up, in the "Why This Matters" section at the end of this article on Bel Fuse Inc (NASDAQ:BELFB) , 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 BELFB. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.
BELFB Recent Realized Volatility
Realized volatility using proprietary measures has hit an elevated level.
Even though Bel Fuse Inc generates substantial revenue, its a small cap technology company which means BELFB is susceptible to excessive risk.
We also note that BELFB 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 technology sector volatility is (the yellow curve) relative to the S&P 500.
Let's take a deep dive into some institutional level volatility measures for Bel Fuse Inc (NASDAQ:BELFB) .
Bel Fuse Inc Stock Performance
BELFB is down -30.4% over the last three months and down -8.7% over the last six months. The stock price is up +51.5% over the last year. The current stock price is $22.45.
BELFB Step 1: Stock Returns
↪ The 3-month stock return of -30.4% has a substantial impact on the realized volatility rating for BELFB.
↪ The noteworthy difference between the 3-month and 6-month stock returns has a meaningful impact on the realized volatility rating for BELFB.
BELFB Step 2: Daily Realized 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 Bel Fuse Inc (NASDAQ:BELFB) and how the day-by-day realized historical volatilities have impacted the rating:
↪ The HV20 of 56.5% is in the middle ground, neither elevated nor depressed, so in this case the raw HV20 number has no impact on BELFB's volatility rating.
BELFB Step 3: Bel Fuse Inc HV20 Compared to Indices
* The HV20 for BELFB is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.
* The HV20 for BELFB is substantially larger than that for the Technology ETF (XLK) which raises the volatility rating.
Here is summary data in tabular and chart format.
| S&P 500
| NASDAQ 100
BELFB 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 BELFB is 53.7%, which is just high enough to have a small impact on the realized volatility rating.
Here is summary data in tabular and chart format.
Final Realized Volatility Percentile Level: BELFB
The final evolution of the volatility rating for Bel Fuse 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 Bel Fuse Inc is 81%, which means the stock has seen substantially elevated volatile price movement relative to its own past and that has an impact on the realized volatility rating.
Bel Fuse Inc Realized Volatility Percentiles