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.

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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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