Amazon.com Inc (NASDAQ:AMZN) Realized Volatility Hits A Tumbling LowDate Published: 2017-04-19
Stock Alert - But Not What You Might Think
Before we cover the full analysis we make a quick alert here that Amazon.com Inc (NASDAQ:AMZN) has seen its stock price move at a collapsing low level. We'll go through the details below -- but that's the lede -- the stock has been unusally quiet. If there was a post it note to summarize the stock movement in the last 30-days it would likely read "quiet time... too quiet?" The HV20 is 13.95% verus the HV20 of the S&P 500 at 7.36%.
Another bit to this alert of quiet time, which we cover in the article, is that while the historical volatility may be a collapsing low level, the real question that needs to be answered for option traders is not if the HV20 is low, 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 Amazon.com 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 Amazon.com Inc (NASDAQ:AMZN) . 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 Amazon.com Inc (NASDAQ:AMZN) , 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 AMZN. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.
AMZN Recent Realized Volatility
Realized volatility using proprietary measures has hit a collapsing low level.
Even though Amazon.com Inc is a legitimate large cap, just the fact that it is a technology company makes AMZN susceptible to elevated risk due to issues surrounding unrest in the European Union and patent fights as well as an unending need to drive innovation forward through proper research and development. 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.
While stocks with AMZN's profile see a short-term quiet period, this is also one of those times when a shake out volatility move could be on the horizon. Let's take a deep dive into some institutional level volatility measures for Amazon.com Inc (NASDAQ:AMZN) .
Amazon.com Inc Stock Performance
AMZN is up +11.9% over the last three months and up +10.5% over the last six months. The stock price is up +42.2% over the last year. The current stock price is $903.78.
AMZN Step 1: Stock Returns
↪ The 3-month stock return of +11.9% has a small impact on the realized volatility rating for AMZN.
↪ The small difference between the 3-month and 6-month stock returns does not impact the realized volatility rating for AMZN.
AMZN 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 Amazon.com Inc (NASDAQ:AMZN) and how the day-by-day realized historical volatilities have impacted the rating:
↪ The HV20 of 16.9% is quite low and has a substantial downward impact on AMZN's volatility rating.
AMZN Step 3: Amazon.com Inc HV20 Compared to Indices
* The HV20 for AMZN is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.
* The HV20 for AMZN 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
AMZN 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 AMZN is 36.1%, which is not enough to impact the realized volatility rating.
Here is summary data in tabular and chart format.
Final Realized Volatility Percentile Level: AMZN
The final evolution of the volatility rating for Amazon.com 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 Amazon.com Inc is 21%, which means the stock has seen low volatility in its price movement relative to its own past and that has a slightly dampening impact on the realized volatility rating.
Amazon.com Inc Realized Volatility Percentiles