Options Data Attractive On Tapestry Stock as Shares Hit Fresh High

TPR shares just tapped a four-year peak

by Josh Selway

Published on Feb 27, 2018 at 10:45 AM

After buying Kate Spade back in October, Coach changed its name to Tapestry Inc (NYSE:TPR), and since then the stock has been on fire. In fact, TPR shares just touched a four-year high of $51.64 today -- likely enjoying a halo lift from Macy's (M) -- meaning they've now rallied over 33% since their early October lows. Maybe more importantly, the equity has cleared the $48 level, the site of a 2014 bear gap that had acted as technical resistance. Data suggests the security may be an attractive target for options traders, too.

Specifically, Schaeffer's Senior Quantitative Analyst Rocky White compiled a list of stocks that are trading near 52-week highs yet have low Schaeffer's Volatility Indexes (SVI). In other words, volatility expectations remain low despite impressive technical strength. As it stands now, TPR has an SVI of 21%, which is just 6 percentage points from a 12-month low, hinting at enticingly low premiums for near-term options contracts.

For what it's worth, the stock has flashed a similar "signal" one other time since 2008, and jumped 7.8% a month afterward. A similar move this time around would place the equity near the $55.65 level.

Still, sentiment is mixed on Tapestry shares. On the one hand, analysts are very bullish, with 15 of 23 handing out "strong buy" ratings. In a similar vein, short interest has been falling for months, including a nearly 24% drop in the last reporting period, and less than 3% of the float is now sold short.

In the options pits, however, traders have been gobbling up long puts over calls. This is according to TPR's 10-day put/call volume ratio of 6.54 at the International Securities Exchange (ISE), Chicago Board Options Exchange (Cboe), and NASDAQ OMX PHLX (PHLX), which ranks just 2 percentage points from a 12-month high. Of course, given the stock's outperformance, it's possible some of these put traders are shareholders using options to hedge.


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