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Utility Stocks: Key Quantitative Insights for Investors

PART:
1 2 3
Utility Stocks: Key Quantitative Insights for Investors PART 1 OF 3

Why Option Traders Should Watch These Utility Stocks

Utility stocks with high implied volatilities

On May 5, 2017, NRG Energy (NRG) had the highest implied volatility among the stocks in the Utilities Select Sector SPDR ETF (XLU). NRG Energy’s implied volatility was 33.8% on May 5, 6.7% below its 15-day average.

Why Option Traders Should Watch These Utility Stocks

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On May 2, 2017, NRG Energy announced its 1Q17 earnings. It reported a net diluted loss of $0.52 per share. On May 1, 2017, a day before the earnings announcement, its implied volatility rose 3.8%. On May 2, 2017, the stock fell 5.4%.

We’ll analyze NRG Energy’s stock price returns in the next part of this series, and we’ll discuss its short interest in the final part.

The implied volatilities of other utility stocks as of May 5, 2017, are as follows:

  • AES (AES): 21.4%, 9.7% below its 15-day average
  • Scana (SCG): 18.5%, 0.4% below its 15-day average
  • FirstEnergy (FE): 17.8%, 7% below its 15-day average
  • Exelon (EXC): 16.2%, 11.9% below its 15-day average

Utility stocks with low implied volatilities

On May 5, 2017, PPL (PPL) had the lowest implied volatility of all the utility companies that make up XLU. Its implied volatility was 11.2%, 16% below its 15-day average.

Let’s look at some other utility stocks with low implied volatilities as of May 5, 2017:

  • Southern Company (SO): 11.7%, 7.2% below its 15-day average
  • American Electric Power Company (AEP): 11.7%, 9.1% below its 15-day average
  • Consolidated Edison (ED): 11.8%, 15.3% below its 15-day average
  • Public Service Enterprise Group (PEG): 11.9%, 25.4% below its 15-day average

In general, the low implied volatility utility stocks listed above are larger companies with relatively stable operations compared to higher implied volatility stocks.

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

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