Etsy Inc (ETSY) Option Bulls Eye More Post-Holiday Gains

Etsy Inc (ETSY) option bulls are active, and the e-tail stock may have more room to run

Jan 6, 2017 at 3:34 PM
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As brick-and-mortar retail stocks struggle amid generally weak holiday sales numbers, e-tail stocks are going strong. Among those riding the wave higher is online retail shop Etsy Inc (NASDAQ:ETSY), last seen up 5.5% at $13.08, as trading volume spikes amid unconfirmed takeover chatter -- according to Trade-Alert. Whatever the catalyst, though, option bulls are hitting the online retail stock hard today.

Specifically, calls are trading at four times their average intraday rate, with 2,929 contracts on the tape compared to fewer than 100 puts. Most active is the front-month January 2017 12.50-strike call -- already the leading front-month open interest position -- where it looks like new positions are possibly being purchased. If this is the case, option buyers are betting on ETSY extending its run north of $12.50 through expiration at the close on Friday, Jan. 20.

Widening the lens even further, ETSY's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 24.61 calls have been bought to open for every put over the last 10 weeks, a reading that sits just 5 percentage points from an annual peak.

Drilling down, ETSY's top open interest position is the March 15 call, with 10,629 contracts outstanding. According to the major options exchanges, a healthy portion of this activity has been of the buy-to-open kind, indicating options traders see a bigger breakout for ETSY over the next several months.

Elsewhere, ETSY's short interest is down 30% in the last two reporting periods. If short sellers continue to exit their positions, this could further fuel ETSY's rise. Additionally, half of all analysts covering the shares rate them a "hold." This leaves the door open for future upgrades, which could push the shares higher.

On the charts, the shares of Etsy Inc (NASDAQ:ETSY) have found support in the $11-$12 range since November -- near a 50% Fibonacci retracement of the stock's rally from January to October. What's more, ETSY's long-term technical strength has the shares sitting up more than 116% since its January 2016 record low near $6.00.


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