Reuters / Carlos Barria
A costumed performer stands beside a security guard at the gate of the Shanghai Nightmare haunted house attraction in Shanghai October 27, 2010.
The US stock market may be fresh off its most boring stretch in more than five decades, but there are still stocks that give investors nightmares.In a client note on Wednesday, the derivatives team at Goldman Sachs identified 15 companies that traders see as having elevated downside risk over the next 12 months.
To single out the most-feared stocks in its coverage universe, Goldman looked at two measures:
- 12-month implied volatility - The estimated price swing for a stock over the next year. Calculated using the price of options
- 12-month skew - The degree to which investors are hedging against losses in a stock, relative to bets on gains. Calculated using the implied volatility spread between one-year put and call contracts
In order to qualify for Goldman's "most-feared" list, a stock had to have been in the 40th percentile or above for each of these measures over the past year. The firm then ranked those 15 companies in order of 12-month normalized skew percentile.
The following charts show just how much more worry has been baked into these 15 companies over the past year, based on the two measures listed above:
Goldman Sachs