Options Traders Expect Huge Moves in CF Industries Holdings (CF) Stock
Investors in CF Industries Holdings, Inc. CF need to pay close attention to the stock based on moves in the options market lately. That is because the Sep 22nd 2017 $26.50 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 CF Industries, but what is the fundamental picture for the company? Currently, CF Industriesis a Zacks Rank #3 (Hold) in the Fertilizersindustry that ranks in the Top 19% of our Zacks Industry Rank. Over the last 60 days, the current year Zacks Consensus Estimate has seen one upward versus three downward revisions. The net effect has been taken by the Zacks Consensus Estimate going to a loss of 56 cents from a loss of 32 cents in that period.
Given the way analysts feel about CF Industries right now, this huge implied volatility could mean there’s 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.
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