Investing Ideas From 5 Companies Facing High Implied Volatility

The options market provides insight for investors looking for companies that may have recently experienced large price swings. In the options market, large price swings increase the value of the call or put. [More List Ideas:  6 S&P 500 Dividend Stocks Undervalued by the Graham Number]

More importantly, investors looking for buying and selling ideas could also anticipate the volatility, along with the price swings, to continue in the short-term. Some of the companies having the highest volatility are listed below: 


High Implied Volatility


1. Brocade Communications Systems, Inc. ( BRCD ): Supplies networking equipment comprising end-to-end Internet protocol based Ethernet and storage area networking solutions. Market cap at $2.55B, most recent closing price at $5.60.

The February $6 call options had an implied volatility of 43.6%. Volatility rose for Broadcade after OCZ Technology (OCZ) provided weak guidance. In early-January, Mellanox (MLNX) warned markets that its quarterly results would be weak. Brocade also named a new CEO. Lloyd Carney comes from Xsigo Systems, a company acquired by Oracle. Brocade also won an injunction against A10 Networks, a private company. Brocade won $112 M from A10 last summer.

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2. Thomson Reuters Corporation ( TRI): Provides intelligent information for businesses and professionals in the financial, legal, tax and accounting, healthcare, science, and media markets worldwide. Market cap at $25.58B, most recent closing price at $30.93.

A Libor overhaul threatens to remove Thomson Reuters as administrator of Libor. Shares have performed poorly since 2008, when Thomson and Reuters merged.

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3. Chesapeake Energy Corporation ( CHK): Engages in the acquisition, development, exploration, and production of natural gas and oil properties in the United States. Market cap at $13.51B, most recent closing price at $20.33.

Shares received a boost after Aubrey McClendon said he would retire as CEO. The debt-heavy company acquired too many properties as natural gas prices plunged to new lows in early-2012. Prices have since recovered somewhat. Chespeake options have an implied volatility of around 40%.

4. Las Vegas Sands Corp. ( LVS): Develops, and operates various integrated resort properties primarily in the United States, Macau, and Singapore. Market cap at $46.01B, most recent closing price at $55.87.

LVS has an implied volatility of 51.7 for February $52.5 option calls. The company reported quarterly (Q4) earnings of $0.54, which was $0.05 lower than estimates. Revenue rose 8.9% to $3 billion. Lower table game holds and a tax assessment reduced margins, but shares rallied higher.

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5. Broadcom Corp. ( BRCM): Designs and develops semiconductors for wired and wireless communications. Market cap at $18.83B, most recent closing price at $33.09.

BRCM shares plunged from $35 to prices below $33 recently. The company declared a dividend of $0.11 per share, which is 10% higher than its previous dividend payment. Shareholders of record February 15 will be paid. Broadcom beat estimates by $0.03 per share when its Q4 earnings were announced. Revenue rose 14.3% to $2.08 billion. The company forecast Q1 revenue would be $1.9 billion, which is below the $2 billion consensus. Gross margins will be largely unchanged.

( List compiled by Kapitall Contributor Chris Lau )