Altaba Stock May Be Sending Up a Buy Signal

Options traders have been more put-heavy than usual on AABA

Managing Editor
Jul 19, 2018 at 1:13 PM
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Shares of Altaba Inc (NASDAQ:AABA) are lower this afternoon, last seen down 1.8% at $73.33. Longer-term, AABA -- formerly Yahoo -- has been moving higher on the charts, recently touching a 17-year high of $82.45 on June 14. What's more, the stock recently flashed a historical buy signal, suggesting it could be time to jump in on AABA's next leg higher.

AABA stock is now within one standard deviation of its 200-day moving average, after a lengthy stretch above this trendline. There have been three other times over the last three years where AABA has pulled back to its 200-day after trading above it for a significant length of time. Following those three prior signals, the stock went on to average a gain of 7.62% over the next month, and was higher 100% of the time, per data from Schaeffer's Senior Quantitative Analyst Rocky White. A similar burst from current levels would put the stock around $78.91.

Daily Chart of AABA wtih 200MA

An unwinding of pessimism among options traders could add fuel to AABA's long-term fire. This is evident in the options pits, with data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showing Altaba stock's 10-day put/call volume ratio of 0.97 in the 87th percentile of its annual range. While this ratio indicates that calls bought to open have outnumbered puts on an absolute basis during the past two weeks, the percentile suggests that puts have been bought to open over calls at a faster-than-usual clip lately. 

Digging deeper, traders (or perhaps one trader) have been accumulating puts and calls at the August 100 strike at a rapid-fire rate. During the past two weeks, open interest at this strike grew by more than 110,000 options on both the call and put sides, with several big, symmetrical blocks added nearly every day since Monday, July 9. It appears the speculator(s) may have bought to open the round-number puts, and reduced the cost of that trade by selling to open the 100-strike calls, betting on AABA to remain in double-digit territory through August options expiration -- which occurs just two days before Altaba's expected earnings release on Aug. 17.

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