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Stock Alert: Edison International Stock Volatility Hits An Extreme Low

Edison International (NYSE:EIX) Stock Volatility Hits An Extreme Low

Date Published:

Stock Alert - But Not What You Might Think
Before we cover the full analysis we make a quick alert here that Edison International (NYSE:EIX) has seen its stock price move at an extreme 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 14.3% 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 an extreme 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.

To jump forward and examine if owning or shorting options has been a positive trade in Edison International, 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 Edison International (NYSE:EIX) . 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.

As a heads up, in the "Why This Matters" section at the end of this article on Edison International (NYSE:EIX) , 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 EIX. Here are the exact steps that led us to this rating, and whether it's a risk alert or a holding pattern.

EIX Recent Stock Volatility

Stock volatility using proprietary measures has hit an extreme low level. While stocks with EIX'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 Edison International (NYSE:EIX) .

Edison International Stock Performance
EIX is down -0.2% over the last three months and up +0.8% over the last six months. The stock price is up +15.5% over the last year. The current stock price is $80.55.

EIX 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 -0.2% is too small to impact the stock volatility rating for EIX.
  The small difference between the 3-month and 6-month stock returns does not impact the stock volatility rating for EIX.

EIX 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 Edison International (NYSE:EIX) and how the day-by-day stock historical volatilities have impacted the rating:

  The HV20 of 13.0% is quite low and has a substantial downward impact on EIX's volatility rating.

EIX Step 3: Edison International HV20 Compared to Indices
* The HV20 for EIX 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 EIX is substantially larger than that for the Industrials ETF (XLI) which raises the volatility rating.

Here is summary data in tabular and chart format.

   S&P 500
   NASDAQ 100
           13.0%    5.89%    12.35%    8.14%

EIX 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 EIX is 23.1%, which is not enough to impact the stock volatility rating.

Here is summary data in tabular and chart format.

HV30 High   
           13.0%    14.3%    23.1%

Final Stock Volatility Percentile Level: EIX
The final evolution of the volatility rating for Edison International 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.

Edison International Realized Volatility Percentiles