Allstate Stock Ripe for Bullish Options Trade

A number of overhead ALL calls just expired, clearing a potential layer of options-related resistance

Jan 23, 2018 at 1:24 PM
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Insurance giant Allstate Corp (NYSE:ALL) is in the midst of a steady, multi-year uptrend which took the stock to a record high at the end of December. The brief pullback following this milestone was neatly contained by the security's 60-day moving average, a familiar layer of support. With ALL shares bouncing from this technical floor, it appears to be an ideal opportunity to initiate a bullish options trade.

all daily chart jan 19

It's shocking to note that despite the equity's long-term success on the charts, analysts have been slow to embrace it. For example, 10 of the 16 brokerages in coverage have "hold" or worse ratings on ALL, suggesting there's plenty of room for bullish analyst attention in the near future.

Meanwhile, ALL has a Schaeffer's put/call open interest ratio (SOIR) of 2.38, which shows an unusual put-skew among near-term options traders, ranking above 77% of readings from the past year. An unwinding of these seemingly bearish positions could fuel upside for the stock. Plus, it should help that a large number of 105-strike calls just expired in the January series.

Allstate has a Schaeffer's Volatility Index (SVI) of 19%, and that is just 9 percentage points from a 12-month low. This hints at low volatility expectations being priced into near-term options contracts.

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