Risk Alert in Option Market: Popular Inc Implied Price Swing Hits An Extreme High – CML News



Risk Alert in Option Market: Popular Inc Implied Price Swing Hits An Extreme High

Popular Inc (NASDAQ:BPOP) Risk Hits An Extreme High

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Risk Alert: Before we dive into any analysis we simply note that Popular Inc (NASDAQ:BPOP) risk is at an extremely elevated level. We’ll detail it below — but that’s the lede — the option market is flashing a neon sign that reads “risk is here” with an IV30 of 39.74% versus the IV30 of the S&P 500 at 7.72%.

One thing to note, which we cover in the article, is that while implied volatility may be high, the real question that needs to be answered for option traders is not if the implied vol is high, but rather if the realized volatility that is coming in the next 30 days will be higher or lower than the option market is pricing.

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

PREFACE

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


Option trading isn’t about luck — this four minute video will change your trading life forever: Option Trading and Truth

In the “Why This Matters” section at the end of this article on Popular 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 BPOP and the company’s risk rating:

We also take a peek at the implied vol for the Financials ETF (XLF), our broad based proxy for BPOP.

Breaking: BPOP risk has exploded to a new annual high.

SNAPSHOT SUMMARY

S&P 500 IV30    7.72%
Nasdaq 100 IV30    12.69%
XLF IV30    13.88%

BPOP HV 30    40.43%
BPOP Current IV30    39.74%
52 Week Low IV30    22.02%
52 Week High IV30    39.74%

The risk as reflected by the option market has hit
an extreme high relative to the company’s past. The option market reflects a 95% confidence interval stock price range of
($31.50, $37.80) within the next 30 calendar days.

BPOP OPTION MARKET RISK

The IV30® is the risk reflected by the option market in the stock price for the next 30 calendar days — it’s forward looking.
Popular Inc shows an IV30 of 39.7%, which is an extreme high for the company relative to its past.

The option market for BPOP has shown an IV30 annual low of
22.0% and an annual high of 39.7%, meaning that BPOP is at the 100% percentile right now. Here’s a table of the data before we dig into the risk rating further.

BPOP
Current IV30    
BPOP
Low IV30    
BPOP
High IV30   
39.7%22.0%39.7%

The implied stock swing risk from the option market is a wider range in the next 30 calendar days for Popular Inc (NASDAQ:BPOP) than it ever has in the last year.

Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 40.43%.

We have a situation now where the IV30 is extremely elevated relative to the past, but even with that risk pricing, the option market reflects the likelihood of less 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 similar the forward risk for Popular Inc is priced (39.7%) compared to what happened just in the last 30-days (40.4%).

Popular Inc Risk Rating

The BPOP risk rating is at 5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 5 rating are:

The IV30 reflects extreme risk peaking to an annual high.
The HV30 is above the 80th percentile.
The stock has moved -18.2% over the last 3-months which does indicate some elevated risk.

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