Investors in Keurig Dr Pepper Inc. KDP need to pay close attention to the stock based on moves in the options market lately. That is because the Jun 20, 2025 $20.00 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 Keurig Dr Pepper share, but what is the fundamental picture for the company? Currently, Keurig Dr Pepper is a Zacks Rank #4 (Sell) in the Beverages- Soft Drinks industry that ranks in the Bottom 31% of our Zacks Industry Rank. Over the last 60 days, no analyst has increased his estimate for the current quarter, while five have revised their estimates downwards. The net effect has taken our Zacks Consensus Estimate for the current quarter to move from 40 cents per share to 38 cents in the same time period.
Given the way analysts feel about Keurig Dr Pepper right now, this huge implied volatility could mean there’s a trade developing. Often times, 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.
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This article originally published on Zacks Investment Research (zacks.com).
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