Painting a volatility picture

Unlike Figure 1, Figure 2 reveals a fingerprint of Flowers Foods’ volatility.What can be learned from studying this
chart? First, the distance between green and red lines is a simple indicator of average volatility.Figure 2’s individual bars represent weekly percentage moves that lead to a certain level of volatility; they arethe spread’s sole components. Bars that exceed the green line indicate
unusually strong weeks. FlowersFoods had only two really strong weeks, one in July and one in October (8- and 13-percent gains, respectively).Bars extending below the red line show losses exceeding the average weekly loss of 4.2 percent. There were 8 such weeks, all of them in the second half of 2008 (three exceeding 10 percent).A pattern of FLO’s volatility emerges over time. Flowers Foods was relatively stable in the first half of 2008 as up and down weeks were evenly distributed and mostly contained within the two average lines. By contrast, the second half of 2008 was much more volatile, especially on
the downside.Weekly GLS charts show price action through a new and different lens. Instead of simply using a standard deviation value for volatility, you are studying underlying information that drives option prices — a deeper level of detail.