Investors in Canopy Growth Corporation CGC need
to pay close attention to the stock based on moves in the options
market lately. That is because the Feb 15, 2019 $50.00 Call 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 Canopy
Growth shares, but what is the fundamental picture for the company?
Currently, Canopy Growth is a Zacks Rank #3 (Hold) in the Medical -
Products industry that ranks in the Top 29% of our Zacks Industry
Rank. Over the last 60 days, no analysts have increased their
earnings estimates for the current quarter, while two have revised
their estimates downward. The net effect has taken our Zacks
Consensus Estimate for the current quarter from a loss of 9 cents
per share to a loss of 15 cents in that period.
Given the way analysts feel about Canopy Growth right now, this
huge implied volatility could mean thereâs a trade developing.
Often times, 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.
Looking to Trade Options?
Each week, our very own Dave Bartosiak gives his top options
trades. Check out his recent live analysis and options trade for
the NFLX earnings report completely free. See it here: Bartosiak:
Trading Netflix's (NFLX) Earnings with Options or check out the
embedded video below for more details:
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days. Click
to get this free report
Canopy Growth Corporation (CGC) : Free Stock Analysis Report
To read this article on Zacks.com click here.