Deckers Outdoor Stock Ideal for a Bullish Options Trade

Stifel raised its DECK price target earlier

Dec 15, 2017 at 1:51 PM
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Deckers Outdoor Corp (NYSE:DECK) has been chopping its way higher throughout 2017 to trade at $76.19 -- up 37.6% year-to-date, and not far from yesterday's nearly three-year peak of $78.77. Unlike Fitbit (FIT), Stifel thinks the Ugg maker has even more room to run, and boosted its DECK price target to $85 from $80, citing optimism over the company's international exposure. And with plenty of skepticism left to be unwound, it could be a prime time to buy call options on the retail stock.

For starters, the door is wide open for more analysts to upwardly revise their outlooks on the footwear specialist. Of the 11 brokerages covering DECK shares, eight maintain a "hold" or "strong sell" rating. Plus, the average 12-month price target of $73.77 stands at a discount to DECK stock's current price.

Elsewhere, short sellers have been ramping up their exposure to DECK in recent months. Specifically, short interest on Deckers Outdoor is up almost 73% from its mid-August low to 5.27 million shares -- the most since February. Not only is it impressive for the stock to rally in the face of intense selling pressure, but it would take shorts more than seven sessions to cover, at the average pace of trading, pointing to ample sideline cash to help fuel the equity's fire.

Those looking to bet on DECK's next leg higher with options are in luck. The stock's Schaeffer's Volatility Index (SVI) of 35% ranks in the 14th annual percentile, indicating low volatility expectations are being priced into short-term options. Plus, Deckers Outdoor's 30-day implied volatility skew of 18.7% ranks higher than 94% of all comparable readings taken in the past year, meaning calls are remarkably cheap relative to puts at the moment.

 

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