Schaeffer's Trading Floor Blog

The Most Volatile Sector of All?

The XLU has the highest 10-day realized volatility of its peers

by 6/26/2014 7:47 AM
Stocks quoted in this article:

Mirror, mirror on the wall, what's the most volatile S&P 500 Index (SPX) sector of them all?

Would you believe utilities? Seriously.

This doesn't get a lot of publicity any more, but there are nine "Select Spyders" you can trade in exchange-traded fund (ETF) form. Basically, all SPX stocks are allocated into one of nine buckets: Energy (XLE), Tech (XLK), Utilities (XLU), Healthcare (XLV), Consumer Discretionary (XLY), Consumer Staples (XLP), Materials (XLB), Industrials (XLI) and Financials (XLF).

Here are the 10-day realized volatility (RV) and 30-day implied volatility ("The VIX of…") each sector, as of midday yesterday:

ETF Volatility June 25, 2014

For the sake of comparison, the current 10-Day RV in the SPDR S&P 500 ETF Trust (SPY) is about 7 now. So in general, the "parts" are moving more than the "whole." Not much more, as you can see.

And right here, right now, the Utilities SPDR ETF (XLU) has a 10-day RV of 15, the highest of the lot!

Now, some of that is because some of these categories are a bit loose, and the stocks in them maybe won't correlate so strongly. (I'm looking at you, Consumer Discretionary and Consumer Staples.) Some of them are dominated by a couple of names that aren't particularly volatile, like Energy.

The biggest reason, though, is just the randomness of the date we chose. The XLU had a big-range day last week. Take that out and it pretty much moves at a 10 volatility clip. That's right in line with all the others and makes the implied volatility (IV) of 14 look fair.

IV here is actually drifting lower, like pretty much everywhere else around the Street. Here's how it looks over the first half of 2014, vs. the ETF itself:


Off the lows! But not that far off the lows.

The Schaeffer's put/call open interest ratio (SOIR) is about 3, which is high in the general sense, but pretty much normal for here.

Utilities are a classic proxy for the bond market. But given that there are 5,000 easy ways to buy bonds in any form you like, not sure why you'd bother with XLU, unless you like your coupons as dividends.

I'm inclined to say the modest uptick in volatility is just noise here, and it just looks like any garden-variety market sector.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

permanent link

Partner Center

© 2015 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email:

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by | Data delayed 15-20 minutes unless otherwise indicated.