Is the Options Market Predicting a gain in Canoo (GOEV) Stock?

Shareholders of Canoo Inc., GOEV, should keep a close eye on the behavior of the stock given recent activity in the options market. Notably, the Apr 19, 2024 $1.50 Call demonstrated some of the most significant implied volatility of all equity options today.

Understanding Implied Volatility

Implied volatility is a measurement of how much sway the market anticipates in the future. When options exhibit high degrees of implied volatility, it implies that investors anticipate a considerable shift in the stock’s direction. This could mean the proximity of an event that might stimulate a substantial rally or a considerable market decline. Yet, it’s important to remember that implied volatility is only a single aspect to consider when devising an options trading strategy.

What’s the Analysts Perspective?

Clearly, options traders are anticipating a notable shift in Canoo’s shares, but what is the company’s fundamental outlook? Presently, Canoo holds a Zacks Rank #3 (Hold) in the Domestic Automotive industry, placing in the Top 32% of our Zacks Industry Rank. Over the past 60 days, one analyst has raised the earnings estimate for the current quarter, while none have scaled theirs down. This activity has led to a change in our Zacks Consensus Estimate for the current quarter from a loss of $1.95 per share to a loss of $1.92.

Given analysts’ current sentiment towards Canoo, this significant implied volatility might signify a forthcoming trade. Often, options traders seek out options with high implied volatility levels to sell premium. This is a common tactic amongst experienced traders as it capitalizes on decay. The goal for these traders, at expiration, is for the underlying stock not to shift as much as initially anticipated.