Investors in BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) need to pay close attention to the stock based on moves in the options market lately. That is because the June $14.00 Call had some of the highest implied volatility of all equity options today.
Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other.
It could also mean there is an event coming up soon that may cause a big rally or a huge
selloff. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy.
Over the last 60 days, two analysts have increased their earnings estimates for the current quarter, while none have revised their estimates downward. The net effect has narrowed the Zacks Consensus Estimate for the current quarter from a loss of 23 cents per share to a loss of 22 cents in that period.
Given the way analysts feel about BioCryst right now, this huge implied volatility could mean there’s a trade developing. Oftentimes, options traders look for options with high levels of implied volatility to sell premium.
This is a strategy many seasoned traders use because it captures decay. At expiration, the hope for these traders is that the underlying stock does not move as much as originally expected.
BCRX shares vaulted $2.79, or 32.8%, to $11.31.
