Options Traders Move In on Rallying Yelp Stock

YELP stock just hit a two-year high

Sep 8, 2017 at 12:59 PM
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Yelp Inc (NYSE:YELP) is outperforming the broader stock market today, last seen trading 0.6% higher at $44.02, and earlier it touched a two-year high of $44.25. Options traders seem to be betting on more upside, too, with calls trading at twice the expected pace. The most popular option by far is the November 50 call, where data points to buy-to-open activity. This would mean speculators expect YELP stock to topple the $50 level in the coming months. 

This bullish bias comes amid an impressive surge from the shares, which have been pushing higher since bottoming just below $27 in May -- thanks in part to last month's strong earnings report. Not only do these bulls have momentum on their side, but it looks like a good time to target Yelp options. This is according to the equity's Schaeffer's Volatility Index (SVI) of 31%, which ranks just 5 percentage points from an annual low. This points to lower-than-usual volatility expectations for near-term options. 

Digging deeper, it's interesting to note that the stock's surge on the charts has corresponded with rising short interest levels. Specifically short interest is up 22% since early June. The security's ability to overcome this selling pressure further showcases its underlying technical strength. One word of warning, however: YELP's 14-day Relative Strength Index (RSI) stands at 74.5, in overbought territory. 

Still, Yelp stock sets up nicely for contrarian bulls. Most notably, it seems highly possible that the shares' recent run higher could be met with bullish analyst attention. That's because right now half of the brokerage firms tracking the security have tepid "hold" ratings, and it's trading north of its average 12-month price target. This suggests there's room for upgrades and/or price-target hikes, which could provide tailwinds for YELP. 

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