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Option Market Alert: Northwest Pipe Company Implied Price Swing Hits An Amplified Level




Northwest Pipe Company (NASDAQ:NWPX) Risk Hits An Amplified Level

Date Published:

No Risk Alert Here: Before we dive into any analysis we simply note that Northwest Pipe Company (NASDAQ:NWPX) 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 52.77% verus the IV30 of the S&P 500 at 11.15%. You might say that the post it note for Northwest Pipe Company would read, "holding pattern." The annual high for Northwest Pipe Company IV30 is 76.59%.



To skip ahead and see if buying or selling options has been a winner in Northwest Pipe Company, 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 Northwest Pipe Company (NASDAQ:NWPX) . 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 Northwest Pipe Company 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 NWPX and the company's risk rating:

We also take a peek at the implied vol for the Industrials ETF (XLI), our broad based proxy for NWPX.





SNAPSHOT SUMMARY
S&P 500 IV30     11.15%
Nasdaq 100 IV30     12.44%
XLI IV30     14.61%

NWPX HV 30     31.94%
NWPX Current IV30     52.77%
52 Week Low IV30     37.69%
52 Week High IV30     76.59%


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 ($11.50, $14.60) within the next 30 calendar days.

NWPX 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. Northwest Pipe Company shows an IV30 of 52.8%, which is an amplified level for the company relative to its past.

The option market for NWPX has shown an IV30 annual low of 37.7% and an annual high of 76.6%, meaning that NWPX is at the 39% percentile right now. Here's a table of the data before we dig into the implied price swing risk rating further.

NWPX
Current IV30    
NWPX
Low IV30    
NWPX
High IV30   
52.8% 37.7% 76.6%

The implied stock swing risk from the option market has created a range which is tighter in the next 30 calendar days for Northwest Pipe Company (NASDAQ:NWPX) 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 31.94%.




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 much higher the forward looking stock swing price risk for Northwest Pipe Company is priced (52.8%) compared to what happened just in the last 30-days (31.9%).

Northwest Pipe Company Risk Rating
The NWPX 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 IV30 is above the HV30.
The stock has moved -26.6% over the last 3-months which does indicate some elevated risk.