Implied Volatility Surging for New Age Beverages (NBEV) Stock Options
Investors in New Age Beverages
Corporation NBEV need to pay close attention to the stock
based on moves in the options market lately. That is because the
May 10, 2019 $5.50 Put had some of the highest implied volatility
of all equity options today.
What is Implied Volatility?
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.
What do the Analysts Think?
Clearly, options traders are pricing in a big move for New Age
Beverages shares, but what is the fundamental picture for the
company? Currently, New Age Beverages is a Zacks Rank #2 (Buy) in
the Beverages – Soft drinks industry that ranks in the Bottom 30%
of our Zacks Industry Rank. Over the last 60 days, no analysts have
increased their earnings estimates for the current quarter, while
two have dropped their estimates. The net effect has widened our
Zacks Consensus Estimate for the current quarter from a loss of 1
cent per share to a loss of 2 cents in that period.
Given the way analysts feel about New Age Beverages 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.
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