Is The Options Market Predicting A Spike In EP Energy (EPE) Stock?

By Zacks Investment ResearchStock MarketsDec 14, 2017 09:00PM ET

www.investing.com/analysis/is-the-options-market-predicting-a-spike-in-ep-energy-epe-stock-200273566

Is The Options Market Predicting A Spike In EP Energy (EPE) Stock?

By Zacks Investment Research | Dec 14, 2017 09:00PM ET

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Investors in EP Energy Corporation (NYSE:EPE) need to pay close attention to the stock based on moves in the options market lately. That is because the Jan 19^th 2018 $7.00 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 EP Energy, but what is the fundamental picture for the company? Currently, EP Energy is a Zacks Rank #3 (Hold) in the Oil and Gas - Exploration and Production - United States industry that ranks in the Top 40% of our Zacks Industry Rank. Over the last 60 days, our Zacks Consensus Estimate for the current quarter has moved from a loss of 13 cents per share to a loss of 12 cents in that period.

Given the way analysts feel about EP Energy 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.

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 NFLXearnings report completely free. See it here: Trading Netflix's (NASDAQ:NFLX) Earnings with Optionsor check out the embedded video below for more details:

EP Energy Corporation (EPE): Free Stock Analysis Report

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Is The Options Market Predicting A Spike In EP Energy (EPE) Stock?

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