Rise in implied volatility for Affirm Holdings (AFRM) stock options – January 3, 2022
Investors in Affirm Holdings, Inc. (AFRM – Free Report) should pay close attention to the action based on movements in the options market in recent times. Indeed, the $ 210.00 call on February 18, 2022 had one of the highest implied volatilities of any stock options today.
What is implied volatility?
Implied volatility shows how much the market expects movement in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks expect a big move one way or the other. It could also mean that there will soon be an event that could cause a big rally or a sell off. However, implied volatility is only one piece of the puzzle when devising an options trading strategy.
What do analysts think?
Obviously, options traders are evaluating a big move for Affirm Holdings shares, but what is the fundamental image of the company? Currently, Affirm Holdings is a Zacks Rank # 4 (Sales) in the Business – Services sector which ranks in the Top 37% of our Zacks Industry ranking. In the past 60 days, no analyst has increased their earnings estimates for the current quarter, while one analyst has revised the estimate down. The net effect widened our Zacks consensus estimate for the current quarter from a loss of 30 cents per share to a loss of 33 cents during this period.
Considering what analysts currently think of Affirm Holdings, this huge implied volatility could mean a trade is growing. Often, options traders look for options with high levels of implied volatility to sell premiums. This is a strategy used by many seasoned traders because it captures the decomposition. Upon expiration, the hope for these traders is that the underlying stock does not move as much as initially expected.
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