UNP Stock Ripe for Bullish Options Trade

UNP stock is bouncing from a key technical level

by Research Dept.

Published on Apr 2, 2019 at 10:44 AM

Freight giant Union Pacific Corporation (NYSE:UNP) has put together a strong 2019, adding over 20% year-to-date. Back in early February, the company announced a massive buyback plan that amounted to 20% of the outstanding shares, which should act as a tailwind going forward. Plus, UNP recently bounced from the $160 level, site of its December highs, and could now be eyeing a fresh run to record highs.

WKEND UNP Chart March 29


Interestingly, options traders have been bearish toward the equity, with the 10-day put/call volume ratio of 2.93 ranking only 4 percentage points from a 12-month high at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Also, the Schaeffer’s put/call open interest ratio (SOIR) of 1.01 shows a rare put-skew among near-term traders. As such, an unwinding of all these bearish positions could fuel upside for UNP.

Union Pacific has a Schaeffer’s Volatility Index (SVI) of 23%, which ranks in the 34th annual percentile, showing relatively low volatility expectations priced into near-term contracts. Our recommended call option has a leverage ratio of 10.4, and will double in value on a 9% gain in the underlying stock.

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