Finisar Corporation (NASDAQ:FNSR) Stock Volatility Hits A Notable HighDate Published: 2017-04-21
Stock Risk Alert
Before we cover the full analysis we make a quick alert here that Finisar Corporation (NASDAQ:FNSR) has seen its stock price whip around at an unsually high level. We'll go through the details below -- but that's the lede -- the stock has been moving and the market's reaction is like a yellow post it note on the face of the ticker that reads "this is not equilibrium" with an HV20 of 83.42% verus the HV20 of the S&P 500 at 6.43%.
Another bit to this risk alert, which we cover in the article, is that while the historical volatility may be an unsually high level (the stock has been whipping around), the real question that needs to be answered for option traders is not if the HV20 is high, 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 Finisar Corporation, 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 Finisar Corporation (NASDAQ:FNSR) . 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.
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As a heads up, in the "Why This Matters" section at the end of this article on Finisar Corporation (NASDAQ:FNSR) , 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 FNSR. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.
FNSR Recent Stock Volatility
Stock volatility using proprietary measures has hit an unsually high level.
Even though Finisar Corporation 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 Finisar Corporation (NASDAQ:FNSR) .
Finisar Corporation Stock Performance
FNSR is down -27.1% over the last three months and down -26.3% over the last six months. The stock price is up +27.2% over the last year. The current stock price is $21.86.
FNSR Step 1: Stock Returns
↪ The 3-month stock return of -27.1% has a substantial impact on the stock volatility rating for FNSR.
↪ The small difference between the 3-month and 6-month stock returns does not impact the stock volatility rating for FNSR.
FNSR Step 2: Daily Stock 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 Finisar Corporation (NASDAQ:FNSR) and how the day-by-day stock historical volatilities have impacted the rating:
↪ The HV20 of 42.9% is in the middle ground, neither elevated nor depressed, so in this case the raw HV20 number has no impact on FNSR's volatility rating.
FNSR Step 3: Finisar Corporation HV20 Compared to Indices
* The HV20 for FNSR is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.
* The HV20 for FNSR 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
FNSR Step 4: Daily Volatility Percentiles and Highs
We also examine the annual high of the HV30 in our rating.
↪ The 52 week high in HV30 for FNSR is 85.7%, which is high and has an upward impact on the stock volatility rating.
Here is summary data in tabular and chart format.
Final Stock Volatility Percentile Level: FNSR
The final evolution of the volatility rating for Finisar Corporation 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.
↪ The HV30 percentile for Finisar Corporation is 97%, which means the stock has seen extremely volatile price movement relative to its own past and that has a large impact on the stock volatility rating.
Finisar Corporation Realized Volatility Percentiles