Stock Volatility Risk Alert: Tech Data Corporation Stock Volatility Hits An Escalated Level

Tech Data Corporation (NASDAQ:TECD) Stock Volatility Hits An Escalated Level

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Stock Risk Alert
Before we cover the full analysis we make a quick alert here that Tech Data Corporation (NASDAQ:TECD) 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 36.25% verus the HV20 of the S&P 500 at 6.62%.

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 Tech Data 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 Tech Data Corporation (NASDAQ:TECD) . 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 Tech Data Corporation (NASDAQ:TECD) , 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 TECD. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.

TECD Recent Stock Volatility

Stock volatility using proprietary measures has hit an unsually high level.

Even though Tech Data Corporation generates substantial revenue, its a small cap technology company which means TECD is susceptible to excessive risk. 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 Tech Data Corporation (NASDAQ:TECD) .

Tech Data Corporation Stock Performance
TECD is up +11.6% over the last three months and down -5.0% over the last six months. The stock price is up +15.6% over the last year. The current stock price is $97.58.

TECD 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 +11.6% has a small impact on the stock volatility rating for TECD.
  The greater than 10% difference between the 3-month and 6-month stock returns has an impact on the stock volatility rating for TECD.

TECD 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 Tech Data Corporation (NASDAQ:TECD) and how the day-by-day stock historical volatilities have impacted the rating:

  The HV20 of 43.5% is in the middle ground, neither elevated nor depressed, so in this case the raw HV20 number has no impact on TECD's volatility rating.

TECD Step 3: Tech Data Corporation HV20 Compared to Indices
* The HV20 for TECD is substantially larger than that for both the S&P 500 and the NASDAQ 100 which raises the volatility rating.

* The HV20 for TECD 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
           43.5%    6.62%    10.69%    12.58%

TECD 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 TECD is 72.0%, which is high and has an upward impact on the stock volatility rating.

Here is summary data in tabular and chart format.

HV30 High   
           43.5%    36.3%    72.0%

Final Stock Volatility Percentile Level: TECD
The final evolution of the volatility rating for Tech Data 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.

Tech Data Corporation Realized Volatility Percentiles