Puts Pop As Skechers Stock Flashes Bearish Signal

SKX shares are near the 160-day moving average

Managing Editor
Oct 22, 2018 at 2:25 PM
facebook twitter linkedin


Sneaker name Skechers USA Inc (NYSE:SKX) has seen heavy options trading in recent weeks, landing on Schaeffer's Senior Quantitative Analyst Rocky White's list of 20 S&P MidCap 400 Index (MID) stocks that saw the most options activity in the past 10 days. Names highlighted yellow are new to the list. SKX is fresh off its best week in over a year, but a pullback could be imminent, if a historic technical signal holds true once more. 

MAO Oct 22

Last week's earnings-induced surge vaulted SKX to within one standard deviation of its 160-day moving average, after a lengthy stretch below this trendline. In the past two years, there have been six other signals of this kind, after which Skechers shares were down by an average of 4.1% a month later and positive only 17% of the time, per data from White. At last check, Skechers stock was down 4.8% at $28.53, extending its year-to-date losses to 25%. Prior to last Thursday's earnings beat, the security had been carving out a channel of lower lows for the past two months. 

MAO SKX Oct 22

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows SKX puts have been increasing in popularity recently. This is shown in its 10-day put/call volume ratio of 0.72, which ranks in the elevated 71st percentile of its annual range. While this ratio indicates calls have outnumbered puts on an absolute basis, the high percentile suggests the appetite for bearish bets has been much healthier than usual. Digging deeper, the January 2019 23- and 25-strike puts are home to peak open interest of 14,671 contracts, collectively.

Meanwhile, short-term options are attractively priced right now, from a volatility perspective. This is according to the security's Schaeffer's Volatility Index (SVI) of 40%, which sits in the 14th percentile of its annual range. In other words, muted volatility expectations are being priced into short-term contracts.

Grab your FREE Eternal Contrarian report!


 




 
Special Offers from Schaeffer's Trading Partners