Both equities sport attractively priced options
For the past week, most of Wall Street has been playing "defense," as U.S.-China trade tensions ramped up. As such, consumer staples stocks have outperformed, and two names in particular could see even more upside in the near term. First up is General Mills, Inc. (NYSE:GIS), which on Monday nabbed an annual high of $52.30 earlier. As GIS bucks the broad-market trend, there are reasons to believe it has more room to run.
Specifically, the stock's Schaeffer's Volatility Index (SVI) of 20% ranks in the 8th percentile of its annual range. This indicates short-term options are cheap, from a volatility perspective. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, the one other time since 2008 that GIS was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of its annual range, the equity posted a one-month gain of 3.42%.
With GIS last seen trading at $52.03, a similar jump would put the equity near $53.80 for the first time since February 2018. Year-to-date, GIS is up 33%, guided higher by its ascending 40-day moving average.
Plus, the stock had been an attractive target for premium buyers over the last 12 months, according to its Schaeffer's Volatility Scorecard (SVS) of 92 (out of a possible 100) -- which meant the shares had consistently realized greater volatility than what GIS option premiums had priced in.
There's another consumer staples stock with a similar technical setup. Procter & Gamble Co (NYSE:PG) nabbed a record high of $107.20 on April 22, and could soon return to those highs, if history is any indicator.
Diving in, PG's SVI of 16% ranks in the 16th percentile of its annual range. According to White, the three other times since 2008 that the stock was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of its annual range, the equity posted a one-month gain of 2%, on average, and was positive all three times.
At last check, Procter & Gamble stock was up 0.7% to trade at $106.31, so a move higher of similar magnitude would put it in record-high territory once more. Similar to its sector peer, PG is up 16% in 2019 and has relied on support from its 40-day moving average. Plus, the equity also found itself on White's list of Monday outperformers, underscoring its technical strength.
In the options pits, PG's Schaeffer’s put/call open interest ratio (SOIR) of 0.98 sits in the 91st percentile of its annual range, showing a much bigger-than-usual put-skew among near-term traders. As such, an unwinding of these bearish positions could fuel upside for the equity.