Investors in Frontline plc FRO need to pay close attention to the stock based on moves in the options market lately. That is because the Jan 17, 2025 $12 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 sell-off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy.
Clearly, options traders are pricing in a big move for Frontline shares, but what is the fundamental picture for the company? Currently, Frontline is a Zacks Rank #3 (Hold) in the Transportation – Shipping industry that ranks in the Bottom 18% of our Zacks Industry Rank. Over the last 30 days, no analyst increased the earnings estimates for the current quarter, while one has dropped the estimates. The net effect has taken our Zacks Consensus Estimate for the current quarter from 75 cents per share to 25 cents in that period.
Given the way analysts feel about Frontline 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.
Check out the simple yet high-powered approach that Zacks Executive VP Kevin Matras has used to close recent double and triple-digit winners. In addition to impressive profit potential, these trades can actually reduce your risk.
Click to see the trades now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Frontline PLC (FRO) : Free Stock Analysis Report