FB Implied Volatility At All Time Low? By Russell Rhoads, CFA

Getting ready this morning I saw a headline scroll across the bottom of the screen on my favorite business network – “Facebook Implied Volatility at All Time Low”. Of course me being me, the word volatility got me all excited. I could not wait to get into work and check out one of the great free tools we have on the CBOE website which is powered by the good people at iVolatility.com and easily charts the historical implied volatility. To get there click on the link below and choose IV Index under the Free Services –

http://www.cboe.com/TradTool/IVolMain.aspx

I pulled up the FB IV Chart which appears below and was surprised to see a different result than the headline –

2122

The amber line represents 30 day implied volatility as indicated by FB option prices while the blue line represented the 30 day historical volatility for FB stock. The amber line is definitely closer to the low end than the high end of FB’s range of implied volatility since options were listed back in May 2012, but on the low, not as of the close yesterday.

When I see references to the market without the hard data accompanying the quote, I like to live by the words of Ronald Reagan, “Trust, but verify”. When it comes to verifying implied volatility you may want to bookmark the link to the free IV Index tool on our website.