BioMarin Pharmaceutical Inc (NASDAQ:BMRN) Stock Volatility Hits A Tumbling LowDate Published: 2017-11-25
Stock Alert - But Not What You Might Think
Before we cover the full analysis we make a quick alert here that BioMarin Pharmaceutical Inc (NASDAQ:BMRN) has seen its stock price move at a tumbling low 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 22.35% verus the HV20 of the S&P 500 at 5.89%.
Another bit to this alert of quiet time, which we cover in the article, is that while the historical volatility may be a tumbling low 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 BioMarin Pharmaceutical Inc (NASDAQ:BMRN) . 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 BioMarin Pharmaceutical Inc (NASDAQ:BMRN) , 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 BMRN. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.
BMRN Recent Stock Volatility
Stock volatility using proprietary measures has hit a tumbling low level.
Even though BioMarin Pharmaceutical Inc generates substantial revenue, its market cap is small enough that just the fact that it's a biotechnology pharmaceutical company, in and of itself, makes BMRN susceptible to excessive risk as the stock may vascillate based on drug trial results, FDA decisions, competitor FDA data, new government pricing rules, and especially takeover rumors.
We also note that BMRN 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 BMRN'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 BioMarin Pharmaceutical Inc (NASDAQ:BMRN) .
BioMarin Pharmaceutical Inc Stock Performance
BMRN is up +0.3% over the last three months and down -6.0% over the last six months. The stock has returned -6.1% over the last year. The current stock price is $82.71.
BMRN Step 1: Stock Returns
↪ The 3-month stock return of +0.3% is too small to impact the stock volatility rating for BMRN.
↪ The small difference between the 3-month and 6-month stock returns does not impact the stock volatility rating for BMRN.
BMRN 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 BioMarin Pharmaceutical Inc (NASDAQ:BMRN) and how the day-by-day stock historical volatilities have impacted the rating:
↪ The HV20 of 16.3% is quite low and has a substantial downward impact on BMRN's volatility rating.
BMRN Step 3: BioMarin Pharmaceutical Inc HV20 Compared to Indices
* The HV20 for BMRN is greater than that for both the S&P 500 and the NASDAQ 100 which has a small impact on the volatility rating.
* The HV20 for BMRN 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
BMRN 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 BMRN is 43.2%, which is not enough to impact the stock volatility rating.
Here is summary data in tabular and chart format.
Final Stock Volatility Percentile Level: BMRN
The final evolution of the volatility rating for BioMarin Pharmaceutical 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.
BioMarin Pharmaceutical Inc Realized Volatility Percentiles