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Risk Alert in Option Market: Plug Power Inc Implied Price Swing Hits A Towering High




Plug Power Inc (NASDAQ:PLUG) Risk Hits A Towering High

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Risk Alert: Before we dive into any analysis we simply note that Plug Power Inc (NASDAQ:PLUG) 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 123.69% 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.

To skip ahead of this risk alert and see if buying or selling options has been a winner in Plug Power Inc, 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 Plug Power Inc (NASDAQ:PLUG) . 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 Plug Power 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 PLUG 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 PLUG.





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

PLUG HV 30     185.62%
PLUG Current IV30     123.69%
52 Week Low IV30     55.56%
52 Week High IV30     148.27%


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 ($1.60, $2.80) within the next 30 calendar days.

PLUG 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. Plug Power Inc shows an IV30 of 123.7%, which is a towering high for the company relative to its past.

The option market for PLUG has shown an IV30 annual low of 55.6% and an annual high of 148.3%, meaning that PLUG is at the 73% percentile right now. Here's a table of the data before we dig into the risk rating further.

PLUG
Current IV30    
PLUG
Low IV30    
PLUG
High IV30   
123.7% 55.6% 148.3%

The implied stock swing risk from the option market reflects a wider range in the next 30 calendar days for Plug Power Inc (NASDAQ:PLUG) than it has on on average.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 185.62%.




We have a situation now where not only is the IV30 elevated relative to the past, but even with that risk pricing, the option market reflects the likelihood of less 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 lower the forward looking stock swing price risk for Plug Power Inc is priced (123.7%) compared to what happened just in the last 30-days (185.6%).

Plug Power Inc Risk Rating
The PLUG 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 80th percentile.
The HV30 is above 85%.
The IV30 is below the HV30.
The stock has moved +88.1% over the last 3-months which does indicate some elevated risk.