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What PG&E’s Implied Volatility Trends Indicate

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Implied volatility

Recently, PG&E (PCG) witnessed one of the highest implied volatility levels among its peers. On October 9, PG&E’s implied volatility was 36%—higher than its 15-day average. In comparison, broader utilities’ (XLU) implied volatility was ~13%. The implied volatility represents investors’ anxiety. Higher volatility is usually related to a fall in the stock prices and vice versa.

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PG&E’s volatility increased after the whole wildfire fiasco. In 2017, the volatility was below 20%. Investors’ anxiety regarding PG&E has been evident in its volatility in 2018, which peaked at 67% in June. Recently, Sempra Energy’s (SRE) implied volatility was 15%, which was close to its 15-day average. Edison International’s (EIX) implied volatility was 19%. Broader markets’ implied volatility was close to 8%.

Utilities are commonly seen as being safe due to their stable stock price movements. However, utilities’ implied volatility has been higher than broader markets’ volatility in the last few years.

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