Darden Restaurants Stock Hungry for More Upside

DRI short-term options traders are extremely put-skewed

Jul 11, 2017 at 10:33 AM
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Darden Restaurants, Inc. (NYSE:DRI) has been a steady climber on the charts, sporting a year-to-date gain of roughly 24%. In fact, an impressive earnings report in late June sent the shares to record-high territory. More recently, DRI pulled back to its historically supportive 40-day moving average, suggesting it could be a good time to get behind the equity for its next leg higher.

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Most analysts remain skeptical of the stock, though. For example, 12 of 18 brokerage firms rate DRI a "hold" or "sell." It would seem the outperformer is overdue for bullish analyst attention, which could create tailwinds.

Plus, short-term options traders are extremely put-skewed. This is according to DRI's Schaeffer's put/call open interest ratio (SOIR) of 3.32, which ranks just 4 percentage points from a 12-month high. An unwinding of these positions could also help Darden Restaurants climb the charts.

It's also a good time to target near-term options on DRI. This is according to the stock's Schaeffer's Volatility Index (SVI) of 21%, which lands in the low 6th annual percentile. This indicates low volatility expectations are priced into short-term options. Plus, our recommended call option has a leverage ratio of 8.5, and will double in value on an 11% gain in the underlying shares.

Subscribers to Schaeffer's Weekend Trader Series options recommendation service received this DRI 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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