Should Entercom Investors Worry About Implied Volatility?

Entercom Communications shareholders may need to closely monitor the day-to-day stock price of this pure-play radio company that’s merging with CBS Radio, based on moves seen last week in the options market.

That’s the advice given by Zacks Equity Research ahead of the March 17 expiration of a $20 strike price that saw some of the highest implied volatility of all equity options.

What is implied volatility? Simply stated, it shows the level of movement the market is expecting in the coming months. Options that have high levels of implied volatility could indicate that investors are expecting a big move — in one direction or the other.

It could also mean, Zacks notes, that there is an event coming up — in this case the final integration of CBS Radio’s AM and FM stations — that could result in a steep climb in price … or a huge sell off.