3 Soaring Tech Stocks With Options On Sale

CTSH, STX, and CY stocks have been on fire, yet short-term options prices are attractive

Jan 16, 2018 at 12:17 PM
facebook twitter linkedin


U.S. stocks have been on a tear in January, with the tech-rich Nasdaq touching yet another all-time high out of the gate today. What's more, we just identified three high-flying tech stocks with options at a bargain: Cognizant Technology Solutions Corp (NASDAQ:CTSH), Seagate Technology PLC (NASDAQ:STX), and Cypress Semiconductor Corporation (NASDAQ:CY). Below, we take a look at how CTSH, STX, and CY stocks perform after these rare options signals.

CTSH Stock Eyes 9th Straight Win

Cognizant Technology Solutions stock is pacing for a ninth straight up day, last seen 0.4% higher at $74.88. The shares earlier peaked at $75.78 -- within a point of their Oct. 31 all-time high of $76.51.

CTSH options traders have been scooping up puts over calls at an accelerated clip, either to speculate on or hedge against a pullback. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.40 is higher than nearly two-thirds of all other readings from the past year. An unwinding of pessimism in the options pits could translate into a tailwind for Cognizant stock.

Meanwhile, CTSH sports a Schaeffer's Volatility Index (SVI) of 35.2% -- higher than just 6.9% of all other reading from the past year. Since 2008, there has been just one other time when the equity was within 2% of a 52-week high and had an SVI in the bottom 10% of its annual range -- a sign of muted volatility expectations being priced into near-term options. After that options signal, CTSH shares went on to rally 6.63% in the subsequent month, per data from Schaeffer's Senior Quantitative Analyst Rocky White. A similar rally would put Cognizant Technology stock in record-high territory.

Seagate Technology Stock Flirts With 2-Year Highs

Seagate Technology stock is aiming for its seventh straight daily gain, last seen 0.8% higher at $51.64. The stock is fresh off a two-year high of $52.33, and has rallied nearly 23% already this month, thanks to upbeat revenue guidance and reports of a cryptocurrency investment.

There's plenty of room on the bullish bandwagon, though. In fact, just three analysts deem STX shares worthy of a "buy" or better rating, compared to 15 harboring "holds," and three maintaining "sell" or worse opinions. A round of upgrades could add fuel to STX stock's fire.

A short squeeze could also be in the works for STX. While short interest has declined in the last two reporting periods, these bearish bets still represent nearly 14 sessions' worth of pent-up buying demand, at the security's average pace of trading.

Furthermore, Seagate Technology stock sports an SVI of 44.4% -- in just the 8th percentile of its annual range, pointing to relatively attractive short-term option premiums. Since 2008, there have been just two other options signals of this kind, and STX shares were higher a month later every single time, averaging a healthy gain of 5.22%. Another such rally would place the stock around $54.33 -- territory not explored since mid-2015.

CY Options Are a Bargain

Cypress Semiconductor stock has added nearly 13% so far in 2018, last seen 0.8% higher at $17.22. The equity is now within a stone's throw of its Nov. 21 five-year high of $17.42.

As with STX, CY stock could benefit from a round of well-deserved upgrades. Currently, five out of 13 analysts still offer up tepid "hold" or worse ratings. Meanwhile, it would take about three sessions to buy back the remaining CY shares sold short -- ample fuel for a short-covering boost.

And now is the time to strike for short-term options buyers. The equity's SVI of 35.5% is near the bottom of its annual range, pointing to relatively muted volatility expectations being priced into near-term contracts. After the last two CY options signals, the shares were higher a month later both times, averaging a gain of 5.01%. Another rally of that magnitude would lift Cypress stock to about $18.08  -- a level not touched since early 2012.

What This Election Year Means for Stocks

Ipad with I voted sticker

  


 
Special Offers from Schaeffer's Trading Partners