Newell Stock Could Be Staring Down Options-Related Headwinds

Short-term options traders are extremely call-heavy towards NWL stock

Oct 10, 2017 at 10:20 AM
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Shares of consumer products company Newell Brands Inc (NYSE:NWL) have been sliding since an early August earnings report, and a downwardly revised full-year guidance early last month sent the equity to an annual low. NWL is now down more than 16% year-over-year, but sentiment surrounding the stock remains overly bullish.



Analysts, for example, are extremely optimistic. By the numbers, nine of 13 covering brokerage firms have "buy" or "strong buy" ratings on the shares. A round of downgrades could come through and lead to extended downside.

And options traders are abnormally call-skewed at the moment, evidenced by NWL's Schaeffer's put/call open interest ratio (SOIR) of 0.29, ranking just 4 percentage points from an annual low. With much of this call open interest residing at strikes just above the stock's current perch, short-term headwinds could be in store.

It's certainly a good time to target near-term options, based on the Schaeffer's Volatility Index (SVI) of 20%, which ranks below 87% of all similar marks from the past year -- hinting at low volatility expectations at the moment.

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