Implied Volatility Rises for Brookfield Renewable Stock Options

Investors in Brookfield Renewable Partners L.P. (NYSE:BEP) investors need to pay close attention to the stock based on recent options market moves. That’s because the Aug. 16, 2024 $20 Put option had some of the highest implied volatility of any stock option today.

What is implied volatility?

Implied volatility shows how much the market expects to move in the future. Options with high levels of implied volatility suggest that investors in the underlying stock are expecting a big move in one direction or another. It can also mean that an event is about to happen that could trigger a big rally or a huge sell-off. However, implied volatility is just one piece of the puzzle when putting together an options trading strategy.

What do analysts think?

It’s clear that options traders are pricing in a big move in Brookfield Renewable stock, but what’s the fundamental picture for the company? Brookfield Renewable currently has a Zacks Rank #3 (Hold) in the Utility – Electric Power industry, which ranks in the top 30% of our Zacks Industry Rank. Over the past 60 days, three analysts have raised their earnings estimates for the current quarter, while none have lowered their estimates. The net effect has lifted our Zacks Consensus Estimate for the current quarter from 8 cents per share to 13 cents during that period.

Given how analysts currently view Brookfield Renewable, this huge implied volatility could be a sign that a trade is developing. Often, options traders will look for options with high levels of implied volatility to sell the premium. This is a strategy that many experienced traders use because it involves a downside risk. At expiration, these traders hope that the underlying stock will not move as much as originally expected.

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