Option Market Alert Medicinova Inc Implied Price Swing Hits An Unsually High Level

Option Market Alert: MediciNova Inc Implied Price Swing Hits An Unsually High Level

MediciNova Inc (NASDAQ:MNOV) Risk Hits An Unsually High Level

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Risk Alert: Before we dive into any analysis we simply note that MediciNova Inc (NASDAQ:MNOV) risk is elevated. We'll detail it below -- but that's the lede -- the option market is starting to flash those neon lights that signal "risk is rising" with an IV30 of 98.73% versus the IV30 of the S&P 500 at 8.34%. The annual high for MediciNova Inc IV30 is 148.97%.

To skip ahead of this risk alert and see if buying or selling options has been a winner in MediciNova Inc, you can go here: Getting serious about option trading.

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 MediciNova Inc (NASDAQ:MNOV) . The creator of this model is Capital Market Laboratories (CMLviz.com).

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In the "Why This Matters" section at the end of this article on MediciNova 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 MNOV and the company's risk rating:

We also take a peek at the implied vol for the Health Care ETF (XLV), our broad based proxy for MNOV.

S&P 500 IV30     8.34%
Nasdaq 100 IV30     14.69%
XLV IV30     9.5%

MNOV HV 30     34.89%
MNOV Current IV30     98.73%
52 Week Low IV30     92.9%
52 Week High IV30     148.97%

The implied price swing risk as reflected by the option market has hit an unsually high level relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($4.20, $6.70) within the next 30 calendar days.

The IV30® is the implied price swing risk reflected by the option market in the stock price for the next 30 calendar days -- it's forward looking. MediciNova Inc shows an IV30 of 98.7%, which is an unsually high level for the company relative to its past.

The option market for MNOV has shown an IV30 annual low of 92.9% and an annual high of 149.0%, meaning that MNOV is at the 10% percentile right now. Here's a table of the data before we dig into the implied price swing risk rating further.

Current IV30    
Low IV30    
High IV30   
98.7% 92.9% 149.0%

The implied stock swing risk from the option market is significantly tighter in the next 30 calendar days for MediciNova Inc (NASDAQ:MNOV) than it has been on average for the year. But, even though the IV30 percentile is below 50, other critical volatility measures that we discuss below point to substantially elevated swing price risk.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 34.89%.

We have an unusual situation now where the IV30 is substantially depressed relative to the past, but even with that risk pricing, the option market reflects the likelihood of more 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 higher the forward looking stock swing price risk for MediciNova Inc is priced (98.7%) compared to what happened just in the last 30-days (34.9%).

MediciNova Inc Risk Rating
The MNOV risk rating is at 4.5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 4.5 rating are:

The IV30 is below the 20th percentile.
The IV30 is above 90%, which is very elevated.
The HV30 is below the annual average.
The IV30 is above the HV30.
The stock has moved -8.7% over the last 3-months which does indicate some elevated risk.