Unusual moves in sentiment risk indicators such as credit default swaps and vol markets may typically go unnoticed by equity investors, yet can be excellent leading indicators to potential future share price performance.
By benchmarking current levels of volatility and credit in single stocks relative to their sector and normalising them over multiple time frames, OTAS highlights those shares which are behaving contrarily to peers.
One current example of this is SAB Miller.
SAB is currently experiencing unprecedentedly high levels of absolute implied volatility, currently trading around 40 vol points versus its longer term average of around 25. This implies a move in the shares over the next 3 months of circa +/- 20%.
Given the recent down move in equity markets implied volatility has increased across the curve, so to establish whether this phenomena is centric to SAB we need to benchmark its implied volatility vs industry peers. This particular chart is what OTAS is flagging in the Stamp.
Having had extremely low relative levels of expected volatility around the last week of August(post sell off) the chart has now completely reversed with the vol markets pricing in high degree of share price uncertainty for SAB Miller going forward. Perhaps those in the options market are putting more credence on the recent SAB-Diageo merger piece by Nomura analysts than the equity market ?
As well as Implied volatility, other Core Summary factors are arguably supportive for the shares at the moment :- positive technicals, directors recently buying stock, undemanding valuation and contractions in both short interest and CDS prices over the last week.