Short-term ULTA options are attractively priced at the moment
Ulta stock has had an incredible run. At $283.27, the retail shares have surged nearly 38% on a year-over-year basis. Moreover, from a technical and sentiment perspective, ULTA stock seems poised to run higher, suggesting it may be time for bullish options traders to strike.
Starting on the charts, ULTA is less than one standard deviation from its rising 40-day
moving average. Historically speaking, this trendline has been a major "buy" signal for the shares. Following 14 previous signals in the past three years, the stock has been positive five days out 79% of the time, with an average gain of 3%. Even more impressively, ULTA stock's managed positive post-signal returns over a 21-day time frame 85% of the time, with an average advance of 6.5%.
In spite of this bullish setup, ULTA options traders have displayed a strong preference for long puts over calls. The stock's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is a top-heavy 4.11 -- just 1 percentage point from a 12-month peak.
Open interest levels within the front three-months' series echo this put-focus. Specifically, ULTA stock has a Schaeffer's put/call open interest ratio (SOIR) of 1.74, outstripping 98% of comparable readings recorded in the past 12 months. While some of the put activity could have been at the hands of shareholders protecting their long stock positions, an unwinding among "vanilla" bears could add fuel to the retailer's fire.
As stated previously, this makes now an attractive time for options traders to place bullish bets. Making things even more ideal, Ulta stock sports a Schaeffer's Volatility Index (SVI) of 16%, below 97% of all other readings from the past year. In other words, premium on short-term ULTA options is pricing in relatively low volatility expectations at the moment.