Options Bulls Eye Apple Supplier After Upgrade

Calls had been popular in the options pits before today, too

Assistant Editor
Jul 27, 2020 at 10:14 AM
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The shares of Universal Display Corporation (NASDAQ:OLED) are up 5.8% at $165.88 at last check, after an upgrade from Oppenheimer to "outperform" from "market perform." The firm believes the semiconductor stock is set up to beat expectations and that "its valuation offers an attractive entry point to build a position." More specifically, the analyst in coverage sees no competition in two areas -- formfactor and contrast. 

OLED's recent two-month stagnancy and sideways trading had support underneath from its  80-day moving average. Now, today's pop has the shares breaking out above resistance at the $160 region, and set to topple their 160-day moving average for the first time on a closing basis since a late January bear gap. Year-to-date though, the equity is still down 22.5%. 

As quarterly earnings loom next week --the Apple supplier will report after the close on Aug. 6 -- analysts are overall skeptical.  Of the seven brokerages in coverage, five carry a tepid "hold" or worse rating into today. Meanwhile, the 12-month consensus price target of $173.2 is an 8.8% premium to current levels. 

Sentiment is looking more bullish in the options pits. The stock's 50-day call/put volume ratio of 2.92 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is in the elevated 93rd percentile of its annual range. In other words, this suggests a very healthy appetite for long calls of late.

Today is more of the same. At last check, calls were trading at five times the average intraday amount, and almost four times the number of puts traded. Most popular is the weekly 7/31 160-strike call, where new positions are being opened. Buyers of these calls are betting that OLED's gains will hold through the end of this week, when the contracts expire.

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