The Madison Square Garden Company (NYSE:MSG) Risk Hits A Tumbling LowDate Published: 2017-04-21
Risk Malaise Alert -- Not How You Might Think:
Before we dive into any analysis we simply note that The Madison Square Garden Company (NYSE:MSG) risk is actually priced pretty low by the option market as of right now. We'll detail it below -- but that's the lede -- the option market is reflecting a sort of risk malaise, for now, an IV30 of 26.87% verus the IV30 of the S&P 500 at 11.15%. The annual high for The Madison Square Garden Company IV30 is 41.75% -- and we're below that level. The alert here is low vol.
One thing to note beyond the risk malaise alert, which we cover in the article, is that while implied volatility may be low, the real question that needs to be answered for option sellers is not if the impled vol is low, but rather if the realized volatility that is coming in the next 30 days will be 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 The Madison Square Garden Company (NYSE:MSG) . The creator of this model is Capital Market Laboratories (CMLviz.com).
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But first, let's turn back to MSG and the company's risk rating:
We also take a peek at the implied vol for the Consumer Discretionary ETF (XLY), our broad based proxy for MSG.
|S&P 500 IV30||11.15%|
|Nasdaq 100 IV30||12.44%|
|MSG HV 30||19.44%|
|MSG Current IV30||26.87%|
|52 Week Low IV30||15.56%|
|52 Week High IV30||41.75%|
The risk as reflected by the option market has hit a tumbling low relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($187.60, $212.10) within the next 30 calendar days.
While the option market risk rating is on the low side, we note that companies in this situation are still susceptible to sudden stock move risk, it's simply the probability of that large stock move is depressed. Buyers of options and volatility may find these prices more attractive than at other times.
MSG 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. The Madison Square Garden Company shows an IV30 of 26.9%, which is a tumbling low for the company relative to its past.
The option market for MSG has shown an IV30 annual low of 15.6% and an annual high of 41.8%, meaning that MSG is at the 43% 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 has created a range which is tighter in the next 30 calendar days for The Madison Square Garden Company (NYSE:MSG) than it has been on average for the last year on average.
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.
The Madison Square Garden Company Risk Rating
The MSG risk rating is at 1, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 1 rating are:
↪ The IV30 is below the annual average.
↪ The IV30 is below 30%.
↪ The HV30 is above the annual average.
↪ The HV30 is below 30%.
↪ The IV30 is above the HV30.
↪ The stock has moved +17.8% over the last 3-months which does indicate some elevated risk.