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MARKETS LIVE BLOG:

STOCKS SLIP WITH MIDEAST TENSIONS, EARNINGS IN PLAY

Oil pares losses as traders anticipate Israel's response to Iranian attack

Are Options Traders Betting on a Big Move in Transocean (RIG) Stock?

Zacks Equity Research
·2 min read

Investors in Transocean Ltd. RIG need to pay close attention to the stock based on moves in the options market lately. That is because the Jun 19, 2020 $1.00 Put had some of the highest implied volatility of all equity options today.

What is Implied Volatility?

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 sell off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy.

What do the Analysts Think?

Clearly, options traders are pricing in a big move for Transocean shares, but what is the fundamental picture for the company? Currently, Transocean is a Zacks Rank #3 (Hold) in the Oil and Gas – Drilling industry that ranks in the Top 9% of our Zacks Industry Rank. Over the last 30 days, no analyst has increased the earnings estimates for the current quarter, while three have revised their estimates downward. The net effect has widened our Zacks Consensus Estimate for the current quarter from a loss of 19 cents per share to a loss of 24 cents in that period.

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Given the way analysts feel about Transocean right now, this huge implied volatility could mean there’s a trade developing. Often times, 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.

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Transocean Ltd. (RIG) : Free Stock Analysis Report
 
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Zacks Investment Research