2 Outperforming E-Commerce Stocks With Attractive Options

SHOP options traders have been leaning bullish of late

Managing Editor
Jun 6, 2018 at 1:51 PM
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Tech and retail stocks have been making notable moves during the past few weeks, and Etsy Inc (NASDAQ:ETSY) and Shopify Inc (NYSE:SHOP) are no exception. Below we will take a look at how the e-commerce names have been faring on the charts, as well as to why now may be an affordable time to bet on ETSY and SHOP's next leg higher, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

ETSY Stock Surges to Multi-Year Highs

ETSY has been soaring on the charts since its March 2017 lows, and at last check is up 0.8% at $33.15 -- fresh off a three-year high of $33.29. The shares have gained 146% over the past year, with the 120-day moving average contained pullbacks along the way.

Daily Chart of ETSY with 120MA Since Jan 2017

Etsy stock's Schaeffer's Volatility Index (SVI) is docked at 36% -- in the 8th annual percentile, meaning premium on short-term contracts is relatively cheap at the moment, from a volatility perspective. According to White, the four other times ETSY has been trading near 52-week highs with its SVI ranked in the 20th annual percentile or lower since 2008, the stock was up more than 7%, on average, one month later. Another rally of this magnitude would put Etsy shares above $35.50 -- a stone's throw from the stock's record high of $35.74.

Meanwhile, short interest on ETSY rose 10% during the past two reporting periods, and now accounts for 6.7% of the stock's total available float. An unwinding of these positions could also keep the wind at the security's back.

Shopify Stock Options Attractive

Shopify stock has also been a long-term outperformer on the charts, last seen up 2.3% at $164.81, fresh off a record high of $165.24. SHOP has surged 67% year-over-year, with help from the rising 160-day moving average, which has acted as a trendline of support for the shares since early October.

Daily Chart of SHOP with 160MA Since June 17

Unsurprisingly, options traders have been leaning bullish of late, with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showing a 10-day call/put volume ratio of 1.74, ranking in the 73rd annual percentile. This lofty ratio shows that calls have been purchased over puts at a faster-than-usual clip during the past two weeks. 

SHOP stock's SVI is docked at 37% -- in the 4th annual percentile, meaning premium on short-term contracts is relatively low at the moment, from a volatility perspective. According to White, the six other times SHOP has been trading near 52-week highs with its SVI ranked in 20th annual percentile or lower since 2008, the stock was up 12.4%, on average, one month later. Another rally of this magnitude would put Shopify shares above $185 -- deeper into record-high territory.

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