Stock Alert and Holding Pattern: MKS Instruments Inc Price Volatility Hits An Elevated Level

MKS Instruments Inc (NASDAQ:MKSI) Price Volatility Hits An Elevated Level

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Stock Alert and Holding Pattern
Before we cover the full analysis we make a quick alert here that MKS Instruments Inc (NASDAQ:MKSI) has seen its stock price move at an elevated level. We'll go through the details below -- but that's the lede -- the stock has been behaving, roughly speaking, 'normally.' If there was a post it note to summarize the stock movement in the last 30-days it would likely read "holding pattern." The HV20 is 24.73% verus the HV20 of the S&P 500 at 6.43%.

But don't confuse a holding pattern with low risk -- this is quite possibly an inflection point.

Another bit to this holding pattern, which we cover in the article, is that while the historical volatility may be an elevated level, the real question that needs to be answered for option traders is not if the HV20 is high or low, but rather if the implied volatility that is priced for the next 30-days accuratley reflects what we're about to see in the stock for the next month.

To jump forward and examine if owning or shorting options has been a positive trade in MKS Instruments Inc, you can go here: Getting serious about option trading.

This is a proprietary realized volatility rating created by Capital Market Laboratories (CMLviz) based on a large number of data interactions for MKS Instruments Inc (NASDAQ:MKSI) . We examine the little used gem of daily stock volatility over a 20-day and 30-day trading period, as well as comparisons to the last year and the actual stock returns over the last three- and six-months and the S&P 500 and Nasdaq 100 indices.

Option trading isn't about luck -- this four minute video will change your trading life forever: Option Trading and Truth

As a heads up, in the "Why This Matters" section at the end of this article on MKS Instruments Inc (NASDAQ:MKSI) , we're going to take a step back and show really clearly that there is actually a lot less "luck" in successful option trading than most people are aware of. This idea of an "option trading expert" is vastly over complicated so those with the information advantage can continue to profit at the expense of the rest.

But before that, let's turn back to MKSI. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.

MKSI Recent Price Volatility

Price volatility using proprietary measures has hit an elevated level.

Even though MKS Instruments Inc generates substantial revenue and is a mid cap, technology companies in general have higher stock volatility than the rest of the market. Here is a rolling annual volatility chart of the biotech index (IBB) versus the Nasdaq 100 and the S&P 500. Note how elevated the technology sector volatility is (the yellow curve) relative to the S&P 500.

Let's take a deep dive into some institutional level volatility measures for MKS Instruments Inc (NASDAQ:MKSI) .

MKS Instruments Inc Stock Performance
MKSI is up +14.4% over the last three months and up +45.5% over the last six months. The stock price is up +86.6% over the last year. The current stock price is $70.5.

MKSI Step 1: Stock Returns
The one-year stock return does not impact the volatility rating since we are looking at a shorter time horizon. However, the rating does examine the 3-month returns and the absolute difference between the 3-month and 6-month returns.

  The 3-month stock return of +14.4% has a small impact on the price volatility rating for MKSI.
  The noteworthy difference between the 3-month and 6-month stock returns has a meaningful impact on the price volatility rating for MKSI.

MKSI Step 2: Daily Price Volatility Level
The HV30® takes the stock's day to day historical volatility over the last 30-days and then annualizes it. The HV20 looks back over just 20-days -- a shorter time period. Here is the breakdown for MKS Instruments Inc (NASDAQ:MKSI) and how the day-by-day price historical volatilities have impacted the rating:

  The HV20 of 22.4% is low enough that it has a downward impact on MKSI's volatility rating.

MKSI Step 3: MKS Instruments Inc HV20 Compared to Indices
* The HV20 for MKSI is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.

* The HV20 for MKSI is substantially larger than that for the Technology ETF (XLK) which raises the volatility rating.

Here is summary data in tabular and chart format.

   S&P 500
   NASDAQ 100
           22.4%    6.43%    6.07%    6.28%

MKSI Step 4: Daily Volatility Percentiles and Highs

We also examine the annual high of the HV30 in our rating but in this case the 52 week high in HV30 for MKSI is 34.7%, which is not enough to impact the price volatility rating.

Here is summary data in tabular and chart format.

HV30 High   
           22.4%    24.7%    34.7%

Final Price Volatility Percentile Level: MKSI
The final evolution of the volatility rating for MKS Instruments Inc is a comparison of the HV30 value relative to its past, which is neatly summarized in the percentile -- a scoring mechanism that goes from a low of 1 to a high of 100.

MKS Instruments Inc Realized Volatility Percentiles