SCHW’s recent peak comes amid historically low implied volatility
Shares of financial services name Charles Schwab Corporation (NYSE:SCHW) are 1.1% lower to trade at $80.46 at last glance, as they pull back from yesterday's highest peak since January 2023 at $81.39. There's been no shortage of speculation about what a second Trump term could mean for bank stocks. For traders looking for a quick profit, now could be the time to play SCHW.
Digging deeper, Charles Schwab stock’s recent peak comes amid historically low implied volatility (IV), which has been a bullish combination in the past. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, there were eight other times in the last five years when the shares were trading within 2% of their 52-week highs, while their Schaeffer's Volatility Index (SVI) sat in the 20th percentile of their annual range or below.
This is now the case with the stock's SVI of 24%, which sits in the 18th percentile of its 12-month range. Per White's data, the security was higher one month later after 75% of those instances, averaging a 3.3% return. From its current perch, a similar move would put SCHW above $83.
Shares could benefit from a shift in sentiment in the options pits, too. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SCHW's 50-day put/all volume ratio of 1.20 sits in the 86th percentile of annual readings.
It's worth noting that the stock's Schaeffer's Volatility Scorecard (SVS) of 81 out of 100 implies a tendency to outperform volatility expectations -- an boon for premium players.
Despite the equity's 17.2% year-to-date lead, 10 of 21 covering brokerages still rate SCHW a "hold" or worse, leaving plenty of room for bull notes. Charles Schwab stock blasted through a ceiling $66 area in October, with its latest rally picked up steam on a bounce off the $72 level. Longer term, SCHW sports a 42.6% year-over-year lead.
