investors in LendingTree, Inc. TREE has to pay close attention to the stock due to the recent movements in the options market. That’s because the $45.00 July 21, 2023 put had one of the highest implied volatilities of any stock option today.
What is implied volatility?
The implied volatility shows how much movement the market expects in the future. Options with high implied volatility suggest that investors in the underlying stocks expect a large move in one direction or another. It could also mean that an event is imminent that could trigger a major rally or sell-off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy.
What do the analysts think?
It’s clear that options traders are pricing in a big move for LendingTree stock, but what’s the fundamental picture for the company? Currently, LendingTree is a Zacks rank #3 (Hold) in the Financial Services – Mortgage & Related Services industry, placing in the bottom 21% of our Zacks industry rankings. Over the past 30 days, the Zacks consensus estimate for the current quarter has increased to 31 cents from 32 cents a share.
Given how analysts are currently looking at LendingTree, this huge implied volatility could mean a trade is forming. Options traders often look for options with high implied volatility to sell a premium. This is a strategy that many experienced traders use because it absorbs decay. These traders hope that at expiry the underlying stock will not move as much as originally expected.
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