Implied Volatility Surging for American Electric Power Stock Options
Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could also mean there is an event coming up soon that may cause a big rally or a huge sell-off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy.
Clearly, options traders are pricing in a big move for American Electric Power shares, but what is the fundamental picture for the company? Currently, American Electric Power is a Zacks Rank #3 (Hold) in the Utility - Electric Power industry that ranks in the Top 33% of our Zacks Industry Rank. Over the last 30 days, the Zacks Consensus Estimate for the current quarter has moved from $1.25 per share to $1.23 in that period.Given the way analysts feel about American Electric Power right now, this huge implied volatility could mean there's a trade developing. Oftentimes, options traders look for options with high levels of implied volatility to sell premium. This is a strategy many seasoned traders use because it captures decay. At expiration, the hope for these traders is that the underlying stock does not move as much as originally expected.
Check out the simple yet high-powered approach that Zacks Executive VP Kevin Matras has used to close recent double and triple-digit winners. In addition to impressive profit potential, these trades can actually reduce your risk.Click to see the trades now >>
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American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
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