Utility stocks with high implied volatilities
NRG Energy’s implied volatility was 44.1% on February 1, 2017—5.4% more than its 15-day average.
On January 17, 2017, hedge fund firm Elliott Associates announced that it’s partnering with Bluescape Energy Partners to acquire a combined stake of 9.4% in NRG Energy. Between January 17, 2017, and February 1, 2017, the stock rose 6.5%. In 3Q16, NRG Energy’s adjusted EPS rose 8.4% compared to 3Q15. During the quarter, its cost of operations was a concern despite rising revenue.
Let’s take a look at the implied volatilities of other utility stocks on February 1, 2017.
- AES’s (AES) implied volatility was 27.3%, which was 1.1% more than its 15-day average.
- FirstEnergy’s (FE) implied volatility was 21.1%, which was 1% lower than its 15-day average.
- Exelon’s (EXC) implied volatility was 21.0%, which was 0.2% lower than its 15-day average.
- Sempra Energy’s implied volatility was 20.1%, which was 10.8% more than its 15-day average.
The rise in Sempra Energy’s implied volatility, compared to its 15-day average, is the highest among the five utility stocks with high implied volatilities. Its implied volatility rose 13% on February 1, 2017. The stock fell ~1% on the same day. Analysts expect Sempra Energy’s 4Q16 EPS at $1.52. Its 4Q16 earnings are expected on February 24, 2017.
Utility stocks with low implied volatilities
Let’s look at the other utility stocks with low implied volatilities on February 1.
- Southern Company’s (SO) implied volatility was 15.3%, which was 4.6% more than its 15-day average.
- PPL Corporation’s (PPL) implied volatility was 15.8%, which was 7.6% lower than its 15-day average.
- Duke Energy’s (DUK) implied volatility was 15.9%, which was 1.4% more than its 15-day average.
- Dominion Resources’ (D) implied volatility was 16.3%, which was 3.3% more 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.