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Analyzing Utility Stocks' Volatility and Short Interest

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Analyzing Utility Stocks' Volatility and Short Interest PART 1 OF 3

Which Utility Stocks Have the Highest Implied Volatility?

Utility stocks with high implied volatilities

On February 15, 2017, NRG Energy (NRG) had the highest implied volatility among the utility companies that make up the Utilities Select Sector SPDR ETF (XLU). NRG Energy’s implied volatility was 45.2% on February 15, 2017—0.6% less than its 15-day average.

Which Utility Stocks Have the Highest Implied Volatility?

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Let’s take a look at the implied volatilities of other utility stocks on February 15, 2017.

  • AES’s (AES) implied volatility was 26.3%, which was 1.7% less than its 15-day average.
  • FirstEnergy’s (FE) implied volatility was 20.3%, which was 0.1% more than its 15-day average.
  • NiSource’s (NI) implied volatility was 18.3%, which was 0.5% lower than its 15-day average.
  • Exelon’s (EXC) implied volatility was 17.9%, which was 7.3% lower than its 15-day average.

FirstEnergy’s implied volatility gained the most compared to its 15-day average among the five utility stocks with high implied volatilities. Analysts estimate its 4Q16 EPS to be ~$0.40. It’s expected to release its 4Q16 earnings on February 21, 2017.

Utility stocks with low implied volatilities

On February 15, 2017, NextEra Energy (NEE) had the lowest implied volatility of all the utility companies that make up XLU. Its implied volatility was 13.3%—7.2% lower than its 15-day average.

Let’s look at the other utility stocks with low implied volatilities on February 15.

  • PPL Corporation’s (PPL) implied volatility was 13.8%, which was 7.0% lower than its 15-day average.
  • American Electric Power’s (AEP) implied volatility was 13.9%, which was 4.8% less than its 15-day average.
  • Entergy’s (ETR) implied volatility was 14%, which was 16.9% less than its 15-day average.
  • DTE Energy’s (DTE) implied volatility was 14.1%, which was 10.1% less than its 15-day average.

Large movements or expectations of large movements in stock prices can cause their implied volatilities to rise. In the next part, we’ll take a look at the returns for the above stocks.

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