Harley-Davidson Stock Surges on Electric Motorcycle Merger

Options traders are blasting HOG in response

Digital Content Manager
Dec 13, 2021 at 10:20 AM
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Harley-Davidson Inc (NYSE:HOG) is surging today, last seen up 15.3% to trade at $42.43, after the company announced its electric motorcycle division, LiveWire, is going public via a merger with special purpose acquisition concern AEA-Bridges Impact (IMPX) worth roughly $1.77 billion. The deal comes as Harley-Davidson attempts to appeal to a younger audience, with the new stock expected to be listed under the "LVW" ticker on the New York Stock Exchange (NYSE).

In response, Harley-Davidson stock trading at its highest level since July, while also bursting through a long-term ceiling at the $40.50 mark. Shares have overcome pressure at the 100-day moving average as well. HOG has reclaimed its year-to-date and year-over-year breakeven levels as a result of this session's surge.

Analysts are mostly bearish towards the security, with five of the eight in coverage calling it a tepid "hold" or worse, while the remaining three say "strong buy." Should some of these brokerage firms start to change their tune, HOG could surge even higher. Meanwhile, the 12-month consensus target price of $51.11 is already a 20% premium to current levels.

The security looks ripe for a short squeeze, too. Short interest rose 6.7% over the most recent reporting period, with the 18.06 million shares sold short accounting for 11.8% of Harley Davidson stock's available float, or more than two week's worth of pent-up buying power.

A shift in the options pits could create additional tailwinds for HOG. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day put/call volume ratio of 1.01, which sits higher than 87% of annual readings. This implies long puts are getting picked up at a much quicker-than-usual clip. 

That shift may already be in motion. So far today, 6,887 calls and 1293 puts have been exchanged, which is 37 times the intraday average. Most popular is the December 45 call, followed by the 44 call in the same monthly series, with new positions currently being opened at both.

The equity sports attractively priced premiums, to boot. HOG's Schaeffer's Volatility Index (SVI) of 37% stands higher than just 14% of readings from the past 12 months. This suggests options players are pricing in low volatility expectations for the equity at the moment.

 




 
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