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Utility Stocks: A Look at Implied Volatility and Short Interest

PART:
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Part 2
Utility Stocks: A Look at Implied Volatility and Short Interest PART 2 OF 3

Utility Stocks: How Returns Impact Implied Volatility

Utility stocks with high implied volatilities

NRG Energy (NRG) rose 38.5% in the past year as of March 8, 2017. It has the highest implied volatility of all the utility companies that make up the Utilities Select Sector SPDR ETF (XLU).

In the past five days, NRG Energy has risen 1.9%, while XLU has fallen 1.3%, and the S&P 500 Index (SPY) (QQQ) (SPX-INDEX) has fallen 1.3%. The Dow Jones Industrial Average (DIA) (DJIA-INDEX) fell 1.2% over the same period.

Utility Stocks: How Returns Impact Implied Volatility

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The above chart shows the one-year and last five-day returns of the stocks we identified in the previous part as having high and low implied volatilities. It shows how high volatility stocks moved more sharply than low volatility stocks.

Among the high implied volatility stocks, NRG Energy was the only gainer in the last five days, while AES (AES) fell the most.

NRG Energy also rose the most in the past year among our high implied volatility utility stocks. Its revenue fell 10.8%, and its operating profit margin was 9.8%.

FirstEnergy (FE) was the only loser in the past year among the high implied volatility utility stocks. In the last four quarters, its revenue has risen 4.0%, while its operating profit has fallen 5.2%. Its operating profit margin is 17.6%.

Returns of utility stocks with low implied volatilities

Duke Energy (DUK) has fallen the most in the last five days among low implied volatility utility stocks. On February 16, 2017, it announced its 4Q16 earnings, reporting a fall of $0.33 per share.

In the next part of this series, we’ll look at the utility stocks with the highest short interest-to-equity float ratios. High short interest in a stock can cause a stock’s implied volatility to rise.

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