VZ put buying has been unusually popular in recent weeks
Last week, we highlighted Dow stock Verizon Communications Inc. (NYSE:VZ) as a potential winner from the recently passed tax bill. Today, however, Verizon stock finds itself on a more nefarious list: the worst performing stocks the week of New Year's. Below is a list of stocks that tend to struggle next week, as well as a closer look at VZ.
The 25 S&P 500 Index (SPX) stocks below have been the worst to own during the week of New Year's Day over the past 10 years, according to Schaeffer's Senior Quantitative Analyst Rocky White. To make the list, the equities had to have at least eight years of returns. Verizon is the only Dow stock to make the cut.
VZ stock has ended the week of New Year's Day lower seven of the past 10 years, averaging a loss of 0.6%. Another 0.6% dip from current levels next week would place Verizon shares around $50.28 --a former area of resistance between March and December.
At last check, the equity was up 0.7% to trade at $53.56, flirting with its Jan. 5 annual high of $54.83. However, the shares are quickly approaching overbought territory, as their 14-day Relative Strength Index (RSI) currently stands at 71.
Put buyers have started to come out of the woodwork. The security has a 10-day put/call volume ratio of 0.75 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 91st percentile of its annual range. So while call buying has remained more popular on an absolute basis, long puts have been much more popular than normal.
Digging deeper, however, reveals that the March 2018 52.50-strike calls have seen the biggest rises in open interest during the past 10 days. Data from the major options exchanges shows strong buy-to-open activity at this strike, so a number of options traders foresee more upside from the security in the coming months.
The good news for options traders is that Verizon has consistently rewarded premium buyers over the past 12 months. This is based on the stock's Schaeffer's Volatility Scorecard (SVS), which is docked at 87, meaning VZ has made stronger-than-expected moves on the charts relative to what the options market has priced in.