What Dominion Energy’s Implied Volatility Suggests
Implied volatility for Dominion Energy (D) stock is currently 13%, which is marginally higher than its 15-day average implied volatility. It should be noted that the current implied volatility for Dominion Energy stock is lower than its average of 14% in 2017.
In comparison, the implied volatilities of the Utilities Select Sector SPDR ETF (XLU), a proxy for S&P 500 utilities, is currently 12%. The implied volatility of the SPDR S&P 500 (SPX-INDEX) (SPY) is 8%.
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Implied volatility and interest rates
It’s worth noting that US utilities’ implied volatilities rose when the Fed began raising interest rates in December 2015. But after the Fed raised the rate a quarter of a point four times in the last two years, utility stocks’ implied volatility levels seem to be back to normal at about 10%.
Implied volatility seems to represent investor anxiety. Increases in implied volatility are generally associated with a fall in stock prices.