2 Retail Stocks With Budget-Friendly Options

DKS and FIVE stocks have been defying Wall Street bears

Apr 17, 2018 at 2:33 PM
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Retailer stocks Dick's Sporting Goods Inc (NYSE:DKS) and Five Below Inc (NASDAQ:FIVE) recently popped up on our short list of stocks soaring in spite of rising short interest. In fact, both stocks are defying skeptics all across Wall Street -- and DKS and FIVE sport relatively inexpensive short-term options, to boot.

DKS Stock Defying Option Buyers

Dick's stock has been in a channel of higher lows since November, advancing 26% in the past six months. Nevertheless, DKS short interest surged more than 20% during the past two reporting periods, and now represents close to 15% of the equity's total available float. At the stock's average pace of trading, it would take nearly a week to buy back these bearish bets -- potential fuel for a short squeeze. At last check, DKS stock was down 1.6% at $31.63.

The equity's uptrend in 2018 has also defied option buyers. Although Dick's options volume tends to run light on an absolute basis, the security's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 2.99 -- in the 90th percentile of its annual range. In other words, DKS options buyers have been initiating bearish bets over bullish at a faster-than-usual pace during the past two weeks. An unwinding of pessimism could also propel the shares higher.

In any case, DKS short-term options are a relative steal. The security's Schaeffer's Volatility Index (SVI) of 40% is in just the 16th annual percentile, indicating that lower-than-usual volatility expectations are being priced into near-term options right now.

FIVE Stock Flies High Despite Short Sellers

Five Below stock has been on fire during the past year, advancing more than 67%. This, even as short interest surged 35.5% during the past two reporting periods to represent nearly 14% of FIVE stock's total available float. At last check, the shares were 0.7% higher to trade at $76.96 -- earlier touching a fresh record high of $77.13 --and could go even higher if shorts decide to abandon their losing positions.

Meanwhile, FIVE's Schaeffer's put/call open interest ratio (SOIR) of 0.99 is in the 81st percentile of its annual range. While this tells us that near-term put and call open interest are neck-and-neck on an absolute basis, the percentile indicates short-term traders are more put-heavy than usual right now. An exodus of option bears could also be beneficial to Five Below stock.

As alluded to earlier, the equity's near-term options can be purchased for a relative bargain right now. FIVE's SVI sits at just 32% -- above only 15% of all other readings from the past 12 months.


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