Volkswagen IPO Buzz Fuels Bullish Betting on Navistar Stock

Navistar holds a significant stake in Volkswagen's Traton unit

by Karee Venema

Published on May 14, 2019 at 2:47 PM

Navistar International Corp (NYSE:NAV) stock is booming today, after Volkswagen announced initial public offering (IPO) plans for its Traton truck unit. The German automaker said it plans to price the shares this summer, and the IPO is expected to be Germany's biggest this year. The shares of NAV -- which owns a 16.85% stake in Traton -- were last seen up 7.8% at $33.86.

NAV options volume is running hot this afternoon, too, with 5,700 calls on the tape -- 20 times the expected intraday amount, and 38 times the number of puts traded. The June 40 call is most active, and it looks like several small- and mid-sized blocks were bought to open earlier. If this is the case, call buyers expect NAV to break out above the round $40 level by the close on Friday, June 21 -- when the back-month series expires.

This trend toward calls echoes the broader bias seen among NAV options traders, though. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.14 ranks in the 4th annual percentile, meaning short-term speculators are much more call-skewed than usual. The July 45 call is home to peak open interest of 3,771 contracts, while the May 35 call is Navistar's second most-populated strike, with 1,312 contracts outstanding.

Outside of the options pits, sentiment is mixed. While the 10 covering analysts are equally split between "strong buy" and "hold" ratings, the average 12-month price target of $38.79 is a healthy 14.9% premium to NAV's current price.

On the charts, the stock rose sharply off its late-December lows below $24, eventually topping out just below the $40 mark on March 4. Yesterday, Navistar stock bounced near $29.75 -- a 61.8% Fibonacci retracement of that recent rally -- but is struggling today to overcome its 80-day moving average, a trendline that served as support in late March and early April.

navistar stock daily price chart on may 14

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