VF Corp Stock Looks Set to Keep Sliding

A shift in sentiment among options traders could spell trouble for VF Corp (VFC)

Mar 7, 2017 at 11:56 AM
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Apparel producer VF Corp (NYSE:VFC) has been in a downtrend over the past two years, shedding nearly 20% in the past 12 months. The shares have spent the last few weeks bumping up against resistance at the year-to-date breakeven level, which corresponds with the 80-day moving average -- a trendline VFC hasn't closed above since August.

170303VFC

As the shares have been sliding on the charts, short sellers have been piling on, with these bearish bets increasing by more than 27% during the two most recent reporting periods. But with just 6.3% of VFC's available float dedicated to short interest, there is still plenty of room for more shorts to get on board, putting increasing pressure on the stock.

VFC could also be in trouble should bullish options traders abandon their bets. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have purchased 1.26 calls for every put over the past 10 weeks -- a call/put volume ratio just 8 percentage points from an annual peak. Likewise, the stock's Schaeffer's put/call open interest ratio of 0.70 ranks in the low 6th percentile of its 12-month range, indicating near-term traders have rarely been more call-heavy toward the stock.

It's a prime time to pick up premium on short-term options right now. VFC holds a Schaeffer's Volatility Index (SVI) of 22%, ranking in the low 13th annual percentile, and pointing to lower-than-usual volatility expectations being priced in. Finally, our recommended put option has a leverage ratio of negative 6.5, and will double in value on a 13.1% decline in underlying VFC shares.

Subscribers to Schaeffer's Weekend Series service received this VFC commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Series is one of our most popular trading services.
 

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