Investors in Luckin Coffee Inc. LK need to pay close attention to the stock based on moves in the options market lately. That is because the Mar 20, 2020 $16.00 Put 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.