3 Stocks for Your Bearish Watch List

Option traders have been initiating long calls at a rapid-fire rate on underperforming Chevron Corporation (NYSE:CVX), E I Du Pont De Nemours And Co (NYSE:DD), and InvenSense Inc (NYSE:INVN)

Sep 2, 2015 at 11:13 AM
facebook X logo linkedin

Schaeffer's Quantitative Analyst Chris Prybal recently routed an email highlighting a list of underperforming equities that currently have a low 10-day put/call implied volatility (IV) skew percentile rank. In other words, despite the stock losing ground on the charts, its call options are more expensive than put options -- signaling a higher demand for the former relative to the latter, and possibly flashing a contrarian signal. Three tickers on the list that caught our attention are oil-and-gas issue Chevron Corporation (NYSE:CVX), blue-chip chemical concern E I Du Pont De Nemours And Co (NYSE:DD), and motion tracking specialist InvenSense Inc (NYSE:INVN).

It's been a volatile run for CVX lately, given the roller-coaster ride crude oil has endured. For the most part, though, the majority of the equity's price action has occurred to the downside, with CVX staring at a 31% year-to-date deficit to trade at $77.94 -- and up at double-barreled resistance from its 20-day moving average and the round-number $80 mark.

Nevertheless, option traders have been initiating long calls over puts at a near-annual-high clip in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, CVX's 10-day call/put volume ratio of 1.83 ranks in the the 90th annual percentile. 

Since plunging below its formerly supportive 320-day moving average in early June, DD has been moving sharply lower. In fact, the shares have shed roughly one-quarter of their value under increased pressure from their 10-day moving average, and just touched a two-year low of $48.01 last week. Although the equity is trading higher today -- up 0.6% at $50.29 -- it's more than likely a result of broad-market tailwinds.

In the options pits, the stock's 50-day ISE/CBOE/PHLX call/put volume ratio of 3.46 sits higher than 86% of all similar readings taken in the past year, meaning calls have been bought to open over puts at a faster-than-usual clip. Echoing this is DD's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.49. which indicates near-the-money call open interest more than doubles put open interest among options expiring in three months or less.

Over the past 52 weeks, INVN has surrendered nearly 59% of its value. Additionally, an unconvincing rally attempt off its three-year low of $8.46 -- tagged on Aug. 24 -- was quickly halted by the equity's descending 20-day moving average, and at last check, the shares were lingering near $9.74.

Option traders have been waving the bullish flag, though, and at the ISE, CBOE, and PHLX, INVN's 10-day call/put volume ratio of 9.06 rests just 14 percentage points from a 52-week peak. Plus, the equity's SOIR of 0.62 sits below 98% of all similar readings taken in the last 12-months, suggesting short-term traders have rarely been as call-heavy as they are now.

From a contrarian perspective, such optimism surrounding three underperforming equities could spell trouble down the road. Should Chevron Corporation (NYSE:CVX), E I Du Pont De Nemours And Co (NYSE:DD), and InvenSense Inc (NYSE:INVN) continue to struggle, a capitulation from some of the weaker bullish hands could translate into a fresh wave of selling pressure.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI