Intercept Pharmaceuticals Inc (NASDAQ:ICPT) Realized Volatility Hits A Reduced LevelDate Published: 2017-06-17
Stock Alert - But Not What You Might Think
Before we cover the full analysis we make a quick alert here that Intercept Pharmaceuticals Inc (NASDAQ:ICPT) has seen its stock price move at a lowered level. We'll go through the details below -- but that's the lede -- the stock has been unusally quiet. If there was a post it note to summarize the stock movement in the last 30-days it would likely read "quiet time... too quiet?" The HV20 is 36.25% verus the HV20 of the S&P 500 at 4.84%.
Another bit to this alert of quiet time, which we cover in the article, is that while the historical volatility may be a lowered level, the real question that needs to be answered for option traders is not if the HV20 is 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.
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This is a proprietary realized volatility rating created by Capital Market Laboratories (CMLviz) based on a large number of data interactions for Intercept Pharmaceuticals Inc (NASDAQ:ICPT) . 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 Intercept Pharmaceuticals Inc (NASDAQ:ICPT) , 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 ICPT. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.
ICPT Recent Realized Volatility
Realized volatility using proprietary measures has hit a lowered level.
Intercept Pharmaceuticals Inc is a small cap biotechnology-pharmaceutical company with very small revenue. This reality, in and of itself, makes ICPT susceptible to excessive risk as the stock may vascillate based on drug trial results, FDA decisions, new government pricing rules, and especially takeover rumors.
We also note that ICPT has negative GAAP earnings in the last year which makes it ever more susceptible to stock volatility. 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 biotechnology sector volatility is (the pink curve) relative to the S&P 500.
While stocks with ICPT's profile see a short-term quiet period, this is also one of those times when a shake out volatility move could be on the horizon. Let's take a deep dive into some institutional level volatility measures for Intercept Pharmaceuticals Inc (NASDAQ:ICPT) .
Intercept Pharmaceuticals Inc Stock Performance
ICPT is down -5.5% over the last three months and up +8.0% over the last six months. The stock has returned -14.6% over the last year. The current stock price is $118.4.
ICPT Step 1: Stock Returns
↪ The 3-month stock return of -5.5% is too small to impact the realized volatility rating for ICPT.
↪ The greater than 10% difference between the 3-month and 6-month stock returns has an impact on the realized volatility rating for ICPT.
ICPT Step 2: Daily Realized 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 Intercept Pharmaceuticals Inc (NASDAQ:ICPT) and how the day-by-day realized historical volatilities have impacted the rating:
↪ The HV20 of 38.3% is in the middle ground, neither elevated nor depressed, so in this case the raw HV20 number has no impact on ICPT's volatility rating.
ICPT Step 3: Intercept Pharmaceuticals Inc HV20 Compared to Indices
* The HV20 for ICPT is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.
* The HV20 for ICPT is substantially larger than that for the Health Care ETF (XLV) which raises the volatility rating.
Here is summary data in tabular and chart format.
| S&P 500
| NASDAQ 100
ICPT 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 ICPT is 79.5%, which is high and has an upward impact on the realized volatility rating.
Here is summary data in tabular and chart format.
Final Realized Volatility Percentile Level: ICPT
The final evolution of the volatility rating for Intercept Pharmaceuticals 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.
↪ The HV30 percentile for Intercept Pharmaceuticals Inc is 24%, which means the stock has seen low volatility in its price movement relative to its own past and that has a slightly dampening impact on the realized volatility rating.
Intercept Pharmaceuticals Inc Realized Volatility Percentiles