Implied Volatility Rising for Barclays (BCS) Stock Options
Investors in Barclays PLC BCS needs to pay close attention to the stock based on recent moves in the options market. Indeed, the $1.00 call on July 15, 2022 had one of the highest implied volatilities of any stock option today.
What is implied volatility?
Implied volatility shows the magnitude of the movements the market expects 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 that there is an upcoming event that could cause a big rally or a huge sale. However, implied volatility is only one piece of the puzzle when developing an options trading strategy.
What do analysts think?
Clearly options traders are pricing a big move for Barclays shares, but what is the fundamental picture for the company? Currently, Barclays is a Zacks Rank #3 (Hold) in the Banks – Foreign industry which ranks in the Top 41% of our Zacks Industry ranking. In the past 60 days, two analysts raised their earnings estimates for the current quarter, while none lowered their estimates. The net effect pushed our Zacks consensus estimate for the current quarter from 36 cents per share to 42 cents during this period.
Given what analysts think of Barclays right now, this huge implied volatility could mean a trade is developing. Often options traders look for options with high levels of implied volatility to sell at premiums. This is a strategy that many seasoned traders use because it captures the breakdown. At expiration, the hope of these traders is that the underlying stock does not move as much as originally expected.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.