What Does NRG Energy’s Increased Implied Volatility Mean?



NRG Energy’s implied volatility

NRG Energy (NRG) is the most volatile stock in the S&P 500 Utilities Index. On July 12, 2017, it had an implied volatility of 43%—compared to its 15-day average implied volatility of 39%.

The Utilities Select Sector SPDR ETF (XLU) had an implied volatility of 15% on the same day.


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Merchant power stocks are more volatile

NRG Energy’s relatively volatile earnings ultimately fueled its volatile stock movements. NRG Energy’s peers and other merchant power producer stocks Dynegy (DYN) and Calpine (CPN) generally demonstrate similar implied volatility readings. Calpine’s implied volatility was 45%, while Dynegy’s was 77% on July 12, 2017.

An increase in implied volatility is generally associated with volatile stock prices—either up or down.

Top utility stocks like Duke Energy (DUK) and NextEra Energy (NEE) have an implied volatility around 13%.

To learn about utilities’ current trends and outlook, read US Utilities: Ongoing Weakness Could Be Temporary.


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