Option Market Alert Proto Labs Inc Implied Price Swing Hits An Elevated Level

Option Market Alert: Proto Labs Inc Implied Price Swing Hits An Elevated Level

Proto Labs Inc (NYSE:PRLB) Risk Hits An Elevated Level

Date Published:

No Risk Alert Here: Before we dive into any analysis we simply note that Proto Labs Inc (NYSE:PRLB) 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 49.95% verus the IV30 of the S&P 500 at 11.15%. You might say that the post it note for Proto Labs Inc would read, "holding pattern." The annual high for Proto Labs Inc IV30 is 59.55%.

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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 Proto Labs Inc (NYSE:PRLB) . 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 Proto Labs Inc 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 PRLB 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 PRLB.

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

PRLB HV 30     24.14%
PRLB Current IV30     49.95%
52 Week Low IV30     24.58%
52 Week High IV30     59.55%

This is a highly unusual situation for Proto Labs Inc (NYSE:PRLB) , where a company in the normally low risk Machinery sector shows an elevated level of risk.

The implied price swing risk as reflected by the option market has hit an elevated level relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($46.00, $57.90) 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. Proto Labs Inc shows an IV30 of 50.0%, which is an elevated level for the company relative to its past.

The option market for PRLB has shown an IV30 annual low of 24.6% and an annual high of 59.6%, meaning that PRLB is at the 73% 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   
50.0% 24.6% 59.6%

The implied stock swing risk from the option market reflects a wider range in the next 30 calendar days for Proto Labs Inc (NYSE:PRLB) than it has on on average.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 24.14%.

We have a situation now where not only is the IV30 elevated relative to the past, but the option market reflects the likelihood of yet 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 Proto Labs Inc is priced (50.0%) compared to what happened just in the last 30-days (24.1%).

Proto Labs Inc Risk Rating
The PRLB 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 above the annual average.
The IV30 is above 40%.
The HV30 is below the 20th percentile.
The HV30 is below 30%.
The IV30 is above the HV30.
The stock has moved just -2.1% over the last 3-months which does indicate some depressed risk.