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A Look at XLU’s Recent Implied Volatility Trends



Implied volatility

The broader markets recently witnessed a significant surge in volatility levels. On October 12, implied volatility in the S&P 500 was ~17%, which is much higher than its 15-day average. In comparison, utilities (XLU) on average saw an implied volatility of 17%. Implied volatility represents investor unease. A rising volatility is generally related to a fall in stock prices.

XLU iv

Utilities are seen as generally safe stocks due to their slow and stable stock price movements. However, their volatility levels were historically higher than the broader markets. Last week was an exception when the implied volatility of the broader markets surged significantly amid market turmoil.

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Among the utilities, Pacific Gas and Electric (PCG) stock showed the highest implied volatility of ~36%, while NRG Energy’s (NRG) volatility was ~35%. NRG is one of the smallest constituents of XLU. Implied volatilities of top utility stocks Duke Energy (DUK) and NextEra Energy (NEE) were ~16% recently.

To learn how the biggest utility stocks are positioned going forward, read How the Big Utilities Are Placed for the Future.


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