Why Boot Barn Stock Options Are a Good Buy Right Now

Volatility expectations on short-term BOOT options are relatively low at the moment

Managing Editor
Jun 15, 2018 at 11:27 AM
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Apparel stocks have been making notable moves of late -- and at least one footwear name looks set for more short-term upside. Fortunately, now is an affordable time to bet on Boot Barn Holdings Inc (NYSE:BOOT) options ahead of its next leg higher, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

At last check, Boot Barn stock is down 1.4% at $22.44 amid widespread selling on Wall Street today -- but the stock is less than a month removed from its May 16 two-year intraday high of $26.25. The equity has been on a long-term trend higher since last November, guided by its 20-week moving average. BOOT has soared 224% over the past 12 months.

Weekly Chart of BOOT with 20MA

Boot Barn stock's Schaeffer's Volatility Index (SVI) is docked at 44% -- in the lowest percentile of its annual range, meaning short-term options are extremely cheap at the moment, from a volatility perspective. According to White, the one other time BOOT has been trading near 52-week highs with its SVI ranked in the 20th annual percentile or lower, the stock was up more than 19% one month later. Another rally of this magnitude would put Boot Barn shares at $26.75 one month from now -- at a fresh two-year peak.

Plus, BOOT stock's Schaeffer's Volatility Scorecard (SVS) currently sits at a 90 out of 100. This lofty ranking suggests that BOOT has handily exceeded options traders' volatility expectations during the past 12 months, allowing speculators to make the most of the leverage afforded by options.

Interestingly, Boot Barn stock has also been heavily shorted, currently accounting for nearly 25% of the stock's total available float. It would take more than eight days for the remaining shorts to cover their bearish bets -- and with short interest down 5.6% during the past two reporting periods, some short-covering activity already appears to be underway. Continued strength in BOOT shares could spark more covering by the bears, helping the stock extend its rally higher.

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