Why It's a Good Time to Target Delphi Automotive Call Options

Delphi Automotive could widen its year-to-date lead if short sellers continue to cover

Jun 27, 2017 at 9:15 AM
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Automotive technology expert Delphi Automotive PLC (NYSE:DLPH) has enjoyed a great run on the charts. Year-over-year, the stock is up roughly 22%, hitting an annual high earlier this month. Plus, the shares have repeatedly found support at the $84 level, which not only corresponds with the lows from an early May bull gap, but also with the closely watched 50-day moving average. The stock appears well positioned for an extended push to the upside.

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Short sellers have been throwing in the towel, evidenced by a 37.3% decline in short interest over the past two reporting periods. If this trend continues, it should provide tailwinds for Delphi.

DLPH could find some help on the charts, as near-term put positions continue to unwind. Specifically, the stock's Schaeffer's put/call open interest ratio (SOIR) has been declining since recently peaking above 1.00. Even more promising is the fact that these heavy levels of open interest sit at strikes just underneath the stock's current perch in the August series. This could provide extra support on the charts for DLPH shares.

Finally, it’s a good time to target Delphi options. This is based on the stock's Schaffer's Volatility Index (SVI) of 22%, which ranks in the 7th annual percentile, hinting at low volatility expectations for near-term options. Not to mention, our recommended call option has a leverage ratio of 6.98, and will double in value on a 14.1% gain in the underlying shares.

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

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