Buy Signal Sounds for Struggling Goodyear Stock

There's ample bearish action taking place in GT's options pits today

Deputy Editor
Aug 19, 2020 at 11:28 AM
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The shares of Goodyear Tire & Rubber Co (NASDAQ:GT) are falling this afternoon, down 2.5% at $9.49 at last check, after U.S. President Donald Trump encouraged his Twitter followers to abandon the company following their ban on MAGA hat sales. However, longer term GT just pulled back to a trendline with historically bullish implications, which could propel the equity back above the $10 level.

Specifically, GT just came within one standard deviation of its 40-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, two similar signals have occurred during the past three years. Goodyear stock was higher one month after 50% of these signals, averaging a one-month return of 10.2%. A similar move, from the security's current perch, would put GT at $10.46 -- a level the equity hasn't reached since early June.

GT Chart August 19

Meanwhile, the options pits have been incredibly bullish lately. In fact, GT sports a 50-day call/put volume ratio of 8.17 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That ratio stands higher than 98% of readings from the past year, showing long calls are being picked up at a much faster-than-usual clip. 

Today's option pits, on the other hand, are being ruled by options bears. At last check, over 5,500 puts have crossed the tape -- 32 times the intraday average and volume pacing in the 98th percentile of its annual readings. Most popular by far is the August 9-strike put, followed by the 9.50-strike call from the same series, with new positions being opened at both. 

Those looking to bet on Goodyear stock's next move should to consider options. The equity's Schaeffer's Volatility Index (SVI) of 57% stands higher than just 7% of all other readings from the past 12 months. This implies options traders have been pricing in relatively low volatility expectations on GT. 

 

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