Record Highs Could Be On the Horizon For Visa Stock

V options can be had for a bargain

Patrick Martin
Sep 18, 2018 at 2:45 PM
facebook twitter linkedin


Visa Inc (NYSE:V) has been a darling of the Dow this year; it's one of the top blue-chip gainers in 2018. After settling a credit-card dispute with sector peer MasterCard (MA), Visa stock is up 1% to trade at $147.55 today, a chip-shot from Friday's record high of $148.37. The fun could be far from over, though, as history suggests V shares could be headed even higher in the coming month.

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 17% ranks in the 19th percentile of its annual range. This indicates short-term options are cheap, from a volatility perspective. What's more, per data from Schaeffer's Senior Quantitative Analyst Rocky White, the four other times V has been trading within 2% of a new 52-week high while front-month volatilities have been this low resulted in an average one-month gain of 3.1%. Plus, all four of those returns were positive.

Daily Stock Chart V

A rally of similar magnitude this time around would mean fresh record highs above $150 for Visa stock, which boasts a 29% lead in 2018. V shares are headed toward their sixth straight monthly win, with recent pullbacks contained by their 50-day moving average. 

Short sellers have been headed for the exits, and continued covering could provide tailwinds for the Dow stock. Short interest fell by 11% in the two most recent reporting periods, yet the 27.69 million V shares still sold short still represent nearly a week's worth of pent-up buying power.

The security could also benefit from an unwinding of pessimism in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) Visa sports a 10-day put/call volume ratio of 0.86, which ranks in the 86th percentile of its annual range. This indicates that while calls still outnumber puts on an absolute basis, the rate of put buying relative to call buying has been quicker than usual.

Echoing this put skew is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.99, which ranks in the 91st percentile of its annual range. This shows that short-term traders have rarely been more put-heavy toward the security in the past year. 


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 

Partnercenter