Buy Calls on This Stock During Tax Season

INTU has been red-hot, and one signal suggests the rally could have legs

Mar 14, 2019 at 1:43 PM
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Tax-preparation software maker Intuit Inc. (NASDAQ:INTU) is flirting with record highs again today, peaking at $256.45 earlier. The security has been a beast so far in 2019, rallying more than 30% and outperforming the S&P 500 Index (SPX) by nearly 17 percentage points in the past 60 sessions, guided higher atop its 10-day and 20-day moving averages. What's more, traders may want to consider buying INTU call options ahead of the April 15 tax deadline, if recent history is any indicator.

INTU stock chart march 14

Not only is Intuit stock trading at new highs, but its short-term options are relatively inexpensive right now. The equity's Schaeffer's Volatility Index (SVI) of 21% is in just the 13th percentile of its annual range, suggesting near-term options are pricing in relatively modest volatility expectations.

Since 2008, there have been just four times when INTU was within 2% of a 52-week high and simultaneously sported an SVI in the bottom 20% of its annual range. After those signals, the shares were higher a month later 100% of the time, with an average gain of 4.8%, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. From the equity's current perch of $256.15, a similar bump would put INTU around $268.44 come mid-April.

An exodus of option bears could also add fuel to the security's fire. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.80 is in the 91st percentile of its annual range. While this tells us that calls bought to open have outnumbered puts on an absolute basis in the past 10 weeks, the high percentile points to a much healthier-than-usual appetite for INTU puts lately.


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