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Option Market Alert: China Finance Online Co. Limited Implied Price Swing Hits An Amplified Level




China Finance Online Co. Limited (NASDAQ:JRJC) Risk Hits An Amplified Level

Date Published:

No Risk Alert Here: Before we dive into any analysis we simply note that China Finance Online Co. Limited (NASDAQ:JRJC) 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 53.67% verus the IV30 of the S&P 500 at 11.15%. You might say that the post it note for China Finance Online Co. Limited would read, "holding pattern." The annual high for China Finance Online Co. Limited IV30 is 81.15%.



To skip ahead and see if buying or selling options has been a winner in China Finance Online Co. Limited, you can go here: Geting serious about option trading.

PREFACE
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 China Finance Online Co. Limited (NASDAQ:JRJC) . 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 China Finance Online Co. 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 JRJC and the company's risk rating:

We also take a peek at the implied vol for the Technology ETF (XLK), our broad based proxy for JRJC.





SNAPSHOT SUMMARY
S&P 500 IV30     11.15%
Nasdaq 100 IV30     12.44%
XLK IV30     12.46%

JRJC HV 30     50.34%
JRJC Current IV30     53.67%
52 Week Low IV30     39.32%
52 Week High IV30     81.15%


The implied price swing risk as reflected by the option market has hit an amplified level relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($2.40, $3.10) within the next 30 calendar days.

JRJC OPTION MARKET IMPLIED PRICE SWING RISK
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. China Finance Online Co. Limited shows an IV30 of 53.7%, which is an amplified level for the company relative to its past.

The option market for JRJC has shown an IV30 annual low of 39.3% and an annual high of 81.2%, meaning that JRJC is at the 34% percentile right now. Here's a table of the data before we dig into the implied price swing risk rating further.

JRJC
Current IV30    
JRJC
Low IV30    
JRJC
High IV30   
53.7% 39.3% 81.2%

The implied stock swing risk from the option market has created a range which is tighter in the next 30 calendar days for China Finance Online Co. Limited (NASDAQ:JRJC) than it has been on average for the last year on average.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 50.34%.




We have an unusual situation now where the IV30 is depressed relative to the past, but even with that risk pricing, the option market reflects the likelihood of a greater stock movement in the next 30-days than the stock has realized in the last 30-days. Let's turn to a chart to see what's going on.
 
Note how similar the forward risk for China Finance Online Co. Limited is priced (53.7%) compared to what happened just in the last 30-days (50.3%).

China Finance Online Co. Limited Risk Rating
The JRJC risk rating is at 3.5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 3.5 rating are:

The IV30 is below the annual average.
The IV30 is above 50%.
The HV30 is below the annual average.
The stock has moved -18.0% over the last 3-months which does indicate some elevated risk.