Data shows higher-priced stocks tend to outperform lower-priced shares
Amazon.com, Inc. (NASDAQ:AMZN) has put in a strong technical performance in 2017, up 29%. And though AMZN has retreated from its July 27 record high of $1,083.31, it found a sturdy foothold near $940 -- home to a 38.2% Fibonacci retracement of the November-to-July surge -- last seen trading up 0.8% at $963.28, even after the European Union (EU) issued a lofty
tax fine on the firm. With Amazon shares among the
best to own in the fourth quarter -- and data from Schaeffer's Senior Quantitative Analyst Rocky White showing
triple-digit stocks tend to outperform their lower-priced peers -- it might be prime time to buy calls on the FAANG, or
FAAANG, stock.
In fact, even with Amazon earnings due out the evening of Wednesday, Oct. 25, lower-than-usual expectations are being priced into the stock's short-term options -- per AMZN's Schaeffer's Volatility Index (SVI) of 19%, in the 22nd percentile of its annual range.
Plus, the stock's Schaeffer's Volatility Scorecard (SVS) stands at a lofty 83. What this means is that Amazon stock has tended to make bigger-than-expected moves, relative to what the options market has priced in -- a potential boon to premium buyers.
Against this backdrop, it's no surprise to see call buying has already been accelerated relative to put buying in Amazon's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders have bought to open 87,093 calls and 72,631 puts in the last 10 days. The resultant call/put volume ratio of 1.20 ranks higher than 92% of all comparable readings taken in the past year.
Outside of the options pits, however, short sellers have been ramping up their bearish exposure to the stock. Short interest surged 16.2% in the most recent reporting period ot 5.68 million shares. Amazon's seasonal tailwinds could be amplified, should some of the weaker bearish hands throw in the towel.