Sizzling Sears Stock Swarmed by Option Bulls

Despite gains in Sears stock, the retailer remains at risk of bankruptcy

Mar 29, 2017 at 1:54 PM
facebook X logo linkedin


Sears stock is finally cooling off after gaining for four straight days, and being as much as 12% higher this morning. In fact, the shares were earlier trading above their 200-day moving average for the first time since August. Not surprisingly, SHLD options traders have been targeting calls at an accelerated rate in recent sessions.

Yesterday, call volume hit a 12-month high of 42,395 contracts. Today, SHLD calls are on track to finish in the 99th percentile of their annual range, with 14,000 contracts on the tape so far -- compared to an average daily volume of 8,757.

Digging deeper, it appears SHLD options traders have been taking a longer-term view toward the retail stock. Seeing the largest increases in open interest over the last five sessions are the January 2019 10- and 20-strike calls, adding 5,989 and 4,610 contracts, respectively. Based on Trade-Alert data, it appears buyers have opened new positions, expecting extended gains in Sears stock through January 2019 expiration.

What could work in favor of call buyers is a heavy accumulation of short interest on SHLD. Over 17 million shares are sold short, which would take almost three weeks to cover, at the stock's average daily trading rate. In other words, there's plenty of pent-up buying power to further fuel SHLD's rally.

That said, Sears stock was last seen 0.1% lower at $11.29, and remains a longer-term laggard -- down 25% year-over-year amid bankruptcy rumblings. Today's losses might be more directly related to the shares' 14-day Relative Strength Index (RSI), which settled Tuesday at 72 -- in overbought territory.

Stay in the loop with stocks on the move. Sign up now for Schaeffer's Midday Market Check.
 

*SPONSORED CONTENT*

How to collect 1 dividend check every day for LIFE

Did you know you could collect 1 dividend check every day the market is open? You could also do it starting with just $605! For me, I'm collecting 70 dividend checks every quarter…which averages around 1.1 dividend checks every business day. There's no trading behind this... no penny stocks or high-risk investments. All you do is buy and hold and you're set. There's no set up required either. If you start buying the dividend stocks I show you today... you could collect 1 dividend per day starting as early as this week. Click here for all the details.

*SPONSORED CONTENT*