Option Market Alert 500 Com Limited Implied Price Swing Hits An Inflection Point

Option Market Alert: 500.com Limited Implied Price Swing Hits An Inflection Point

500.com Limited (NYSE:WBAI) Risk Hits An Inflection Point

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No Risk Alert Here: Before we dive into any analysis we simply note that 500.com Limited (NYSE:WBAI) risk is neither elevated nor depressed. We'll detail it below -- but that's the lede -- the option market is in a holding period with an IV30 of 56.89% verus the IV30 of the S&P 500 at 11.15%. You might say that the post it note for 500.com Limited would read, "holding pattern." The annual high for 500.com Limited IV30 is 140.44%.

To skip ahead and see if buying or selling options has been a winner in 500.com Limited, 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 500.com Limited (NYSE:WBAI) . The creator of this model is Capital Market Laboratories (CMLviz.com).

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In the "Why This Matters" section at the end of this article on 500.com Limited 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 WBAI and the company's risk rating:

We also take a peek at the implied vol for the Consumer Discretionary ETF (XLY), our broad based proxy for WBAI.

S&P 500 IV30     11.15%
Nasdaq 100 IV30     12.44%
XLY IV30     12.1%

WBAI HV 30     26.3%
WBAI Current IV30     56.89%
52 Week Low IV30     42.12%
52 Week High IV30     140.44%

The implied price swing risk as reflected by the option market has hit an inflection point relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($11.60, $15.10) within the next 30 calendar days.

The IV30® is the implied price swing risk reflected by the option market in the stock price for the next 30 calendar days -- it's forward looking. 500.com Limited shows an IV30 of 56.9%, which is an inflection point for the company relative to its past.

The option market for WBAI has shown an IV30 annual low of 42.1% and an annual high of 140.4%, meaning that WBAI is at the 15% percentile right now. Here's a table of the data before we dig into the implied price swing risk rating further.

Current IV30    
Low IV30    
High IV30   
56.9% 42.1% 140.4%

The implied stock swing risk from the option market is significantly tighter in the next 30 calendar days for 500.com Limited (NYSE:WBAI) than it has been on average for the year.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 26.3%.

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 500.com Limited is priced (56.9%) compared to what happened just in the last 30-days (26.3%).

500.com Limited Risk Rating
The WBAI risk rating is at 3, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 3 rating are:

The IV30 is below the 20th percentile.
The IV30 is above 50%.
The HV30 is below the 20th percentile.
The HV30 is below 30%.
The IV30 is above the HV30.