Medallion Financial Corp. (NASDAQ:MFIN) Risk Hits A Towering HighDate Published: 2017-04-21
Risk Alert: Before we dive into any analysis we simply note that Medallion Financial Corp. (NASDAQ:MFIN) risk is at an extremely elevated level. We'll detail it below -- but that's the lede -- the option market is flashing a neon sign that reads "risk is here" with an IV30 of 115.24% verus the IV30 of the S&P 500 at 11.15%.
One thing to note, which we cover in the article, is that while implied volatility may be high, the real question that needs to be answered for option traders is not if the impled vol is high, but rather if the realized volatility that is coming in the next 30 days will be higher or lower than the option market is pricing.
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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 Medallion Financial Corp. (NASDAQ:MFIN) . 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 Medallion Financial Corp. 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 MFIN and the company's risk rating:
We also take a peek at the implied vol for the Financials ETF (XLF), our broad based proxy for MFIN.
|S&P 500 IV30||11.15%|
|Nasdaq 100 IV30||12.44%|
|MFIN HV 30||71.89%|
|MFIN Current IV30||115.24%|
|52 Week Low IV30||37.49%|
|52 Week High IV30||178.62%|
The risk as reflected by the option market has hit a towering high relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($1.50, $2.60) within the next 30 calendar days.
MFIN OPTION MARKET RISK
The IV30® is the risk reflected by the option market in the stock price for the next 30 calendar days -- it's forward looking. Medallion Financial Corp. shows an IV30 of 115.2%, which is a towering high for the company relative to its past.
The option market for MFIN has shown an IV30 annual low of 37.5% and an annual high of 178.6%, meaning that MFIN is at the 55% percentile right now. Here's a table of the data before we dig into the risk rating further.
The implied stock swing risk from the option market reflects a wider range in the next 30 calendar days for Medallion Financial Corp. (NASDAQ:MFIN) than it has on on average.
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.
Medallion Financial Corp. Risk Rating
The MFIN risk rating is at 5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 5 rating are:
↪ The IV30 is above the annual average.
↪ The IV30 is above 100%, which is extremely elevated.
↪ The HV30 is above the annual average.
↪ The HV30 is above 70%.
↪ The IV30 is above the HV30.
↪ The stock has moved -34.1% over the last 3-months which does indicate some elevated risk.