How to Measure Stop Risk on a Stock
The Stop Risk Score measures how much room a stock's own recent price action says a stop needs, built from six weighted realized-volatility inputs into a single score. On 2026-09-30 the average score across 4,634 scored stocks was 27.8, comfortably inside the calm band that sets the widest suggested position size.
How the Stop Risk Score Is Actually Calculated
The Stop Risk Score, sometimes called the Valeron stop risk score, is one of the Macro Engine's modules: a single number that says how much room a stock's own recent price action says a stop needs. It is not an options-market read. There is no implied-volatility surface behind it, no skew, no term structure priced by anyone but the stock's own trading. It is built entirely from locally cached daily OHLCV price history pulled from Polygon.io and Yahoo Finance: realized volatility, not implied.
Six inputs feed the score, each weighted by how directly it measures current risk rather than history.
The 20-day volatility percentile carries the most weight, 35%: where a stock's current realized volatility ranks against its own trailing history. It is the most direct read the score has of what the stock's own volatility is doing right now, which is why it outweighs every other single input.
The short-to-long volatility ratio carries 20%: whether the last few days have been noisier or quieter than the last few months, a realized-volatility stand-in for the term-structure read an options trader would normally get from a futures curve.
Latest shock carries 15%: the size of the most recent single large move, a check on whether one violent day is still working through the stock's recent history.
Downside-to-upside volatility asymmetry carries another 15%: whether the recent noise has come more from selling or more from buying. A stop built for a name that has been selling off hard needs different room than one for a name that has been running up on volume, even at the same raw volatility level.
The 20-day drawdown carries 10%: how far the stock has fallen from its own recent high, a direct measure of how much room a position has already given back.
A backwardation proxy fills the last 5%: a rough stand-in for whether short-dated risk is pricing hotter than long-dated risk. It carries the smallest weight because it is the least directly observable of the six without real options data behind it.
No single input decides the score by itself. A stock can take a violent single-day shock and still land in the CALM band if its trailing volatility and drawdown are both otherwise quiet, and a stock with no single large shock can still score ELEVATED if its trailing volatility percentile and short-to-long ratio are both already running hot.
On 2026-09-30, the engine scored 4,634 stocks. The average Stop Risk Score across all of them was 27.8. 3,343 scored CALM, below 35. 929 scored NORMAL, 35 to 54.9. 185 scored ELEVATED, 55 to 74.9. 32 scored STRESSED, 75 or above. A further 145 came back UNAVAILABLE, too little clean price history to score at all.
On 2026-09-30 the average Stop Risk Score across 4,634 scored stocks was 27.8, comfortably inside the CALM band. 3,343 stocks scored CALM outright, 929 NORMAL, 185 ELEVATED and 32 STRESSED, with 145 UNAVAILABLE. Most of the scored universe sat well inside the calm range that day.
An average score of 27.8, sitting well inside the CALM band's range below 35, says most of the scored universe was carrying ordinary, unremarkable volatility on 2026-09-30, not that every individual stock was calm. STRESSED names were a small fraction, 32 of 4,634, and reaching that band or the neighboring AVOID call takes either a genuinely elevated score or a clean-data failure, not just an average day's noise.
The score itself does not decide a position size. It feeds a fixed ladder: 1% suggested risk below 35, 0.75% from 35 to 54.9, 0.5% from 55 to 74.9, AVOID at 75 or above or with insufficient data. How to actually size a position off that ladder, including where a driver cap belongs above it, is its own separate piece; this one is about how the score itself gets built, not what to do with it.
What makes this state flip
The score crosses three real boundaries: 35, 55 and 75. A score just under 35 sits in the CALM band's full suggested-risk tier; one just over it is already cut to the smaller NORMAL-tier size. The six inputs that feed the score do not all move at the same speed: the 20-day volatility percentile and the short-to-long ratio can shift within a single session on a big move, while the 20-day drawdown and the backwardation proxy tend to change more slowly. A score sitting near one of the three boundaries is often one fast-moving input away from crossing it, while the slower ones hold it in place.
The 75 threshold carries an extra wrinkle. A stock can land on AVOID either by scoring 75 or above, or by failing the data-quality check entirely, an OUTLIER or FROZEN price history rather than a genuinely stressed one. Both land on the same suggested-risk outcome for different reasons: one is a specific, measured reading, the other is an absence of clean information to read at all.
What this does not tell you
This is a realized-volatility proxy, not an options-market read. It cannot see implied volatility, skew or anything priced by an options desk rather than the stock's own recent trading, and two stocks with identical realized-volatility histories but very different options markets would score identically here.
The score also cannot tell you which of its six inputs is driving a particular reading. A CALM score built mostly from a quiet volatility percentile looks identical from the outside to one built from a quiet drawdown offsetting a noisier percentile: the number is the same, the underlying picture is not.
A score, or the 27.8 average across the whole universe, says nothing about the macro driver a position belongs to, or how many other positions already share that driver. That gap is what a driver cap, a manual layer on top of this score, exists to close.
Frequently asked questions
What is the Stop Risk Score?
The Stop Risk Score, also called the Valeron stop risk score, is a single number built from six weighted realized-volatility inputs that says how much room a stock's own recent price action says a stop needs. It is not an options-market read: there is no implied volatility behind it, only locally cached daily price history.
Why does the 20-day volatility percentile carry the most weight?
It carries 35% of the score, more than any other single input, because it is the most direct read of what a stock's own realized volatility is doing right now relative to its own trailing history. The other five inputs add context around it: term structure, recent shock, directional asymmetry, drawdown and a backwardation proxy.
Is the Stop Risk Score the same as implied volatility?
No. It is built entirely from realized volatility, locally cached daily OHLCV price history from Polygon.io and Yahoo Finance, never from an options feed. Two stocks with identical realized-volatility histories but very different options markets pricing forward risk would score identically here, since this score cannot see that difference.
What happens when a stock's price history is not clean enough to score?
It comes back UNAVAILABLE and is routed to the same AVOID suggested-risk outcome as a genuinely STRESSED score, for a different reason. On 2026-09-30, 145 of 4,634 scored stocks fell into this category, separate from the 32 that scored 75 or above on the formula itself.
Does a low Stop Risk Score mean a stock is a good trade?
No. A CALM score says the stock's own recent realized volatility is quiet enough to justify the full suggested-risk band, nothing about the direction of the trade or whether the setup itself is any good. It sizes room for a stop, not conviction in the idea.
Related
This score describes recent realized behavior, not what a stock's price does next. A stock can carry a CALM score built entirely from real, current data and still gap hard on news its own price history had no way to contain.