On January 18, the Utilities Select Sector SPDR ETF’s (XLU) implied volatility was close to 15%—lower than its 15-day average volatility. At the same time, the S&P 500 had an implied volatility of 14%. The volatility levels across the broader markets seem to be coming back to normal. The S&P 500 witnessed an implied volatility of 31% in the last week of 2018. Utilities, despite being a slow-moving sector, generally exhibit volatility levels that are higher than broader markets.
The implied volatility represents investors’ unease. Rising volatility is usually related to falling stock prices.
Recently, PG&E (PCG) stock had an implied volatility of 175%—the highest among utilities. The company’s plan to file for bankruptcy due to wildfire liabilities and rating downgrades pulled the stock down.