Stock Volatility Risk Alert: Tesla Inc Stock Volatility Hits An Elevated Level

Tesla Inc (NASDAQ:TSLA) Stock Volatility Hits An Elevated Level

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Stock Risk Alert
Before we cover the full analysis we make a quick alert here that Tesla Inc (NASDAQ:TSLA) 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 37.32% 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 Tesla 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 Tesla Inc (NASDAQ:TSLA) . 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 Tesla Inc (NASDAQ:TSLA) , 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 TSLA. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.

TSLA Recent Stock Volatility

Stock volatility using proprietary measures has hit an elevated level. Let's take a deep dive into some institutional level volatility measures for Tesla Inc (NASDAQ:TSLA) .

Tesla Inc Stock Performance
TSLA is up +25.7% over the last three months and up +49.3% over the last six months. The stock price is up +17.5% over the last year. The current stock price is $298.96.

TSLA Step 1: Stock Returns
The one-year stock return does not impact the volatility rating since we are looking at a shorter time horizon. However, the rating does examine the 3-month returns and the absolute difference between the 3-month and 6-month returns.

  The 3-month stock return of +25.7% has a substantial impact on the stock volatility rating for TSLA.
  The noteworthy difference between the 3-month and 6-month stock returns has a meaningful impact on the stock volatility rating for TSLA.

TSLA 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 Tesla Inc (NASDAQ:TSLA) and how the day-by-day stock historical volatilities have impacted the rating:

  The HV20 of 41.9% is in the middle ground, neither elevated nor depressed, so in this case the raw HV20 number has no impact on TSLA's volatility rating.

TSLA Step 3: Tesla Inc HV20 Compared to Indices
* The HV20 for TSLA is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.

* The HV20 for TSLA is substantially larger than that for the Consumer Discretionary ETF (XLY) which raises the volatility rating.

Here is summary data in tabular and chart format.

   S&P 500
   NASDAQ 100
           41.9%    6.11%    7.36%    6.85%

TSLA Step 4: Daily Volatility Percentiles and Highs

We also examine the annual high of the HV30 in our rating but in this case the 52 week high in HV30 for TSLA is 46.8%, which is not enough to impact the stock volatility rating.

Here is summary data in tabular and chart format.

HV30 High   
           41.9%    37.3%    46.8%

Final Stock Volatility Percentile Level: TSLA
The final evolution of the volatility rating for Tesla 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 Tesla Inc is 61%, which means the stock has seen elevated volatile price movement relative to its own past and that has a small impact on the stock volatility rating.

Tesla Inc Realized Volatility Percentiles