Does the options market predict a sharp rise in Invesco’s mortgage capital (IVR)?

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Investors in Invesco Mortgage Capital Inc. IVRs need to pay close attention to stocks based on recent options market movements. This is because the $ 6.50 call on July 2, 2021 has had one of the highest implied volatilities of any stock option to date.

What is implied volatility?

Implied volatility indicates how the market expects to move in the future. Options with high implied volatility suggest that investors in the underlying stock expect a big move in one direction or another. It could also mean that an event is about to happen that could trigger a big rally or a huge sell-off. However, implied volatility is only one piece of the puzzle when crafting an options trading strategy.

What do analysts think?

It’s clear that options traders are taking a big step in valuing Invesco Mortgage Capital’s stock, but what’s the big picture for the company? Invesco Mortgage Capital is currently ranked # 3 by the Zacks (Hold) in the REIT and Equity Trust industry, ranking in the bottom 48% of our Zacks Industry ranking. Over the past 30 days, the Zacks consensus estimate for current quarter earnings has increased from 8 cents per share to 9 cents.

Given the way analysts now view Invesco Mortgage Capital stock, this massive implied volatility could mean trading is evolving. Option traders often look for options with high implied volatility in order to sell at a premium. This strategy is used by many experienced traders because it fixes decay. After expiration, these traders are hoping that the underlying stock will not move as much as originally expected.

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