Best Bargain Retailer for Options Bulls

FIVE may experience tailwinds if shorts keep hitting the exits

Jun 11, 2019 at 10:30 AM
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Bargain retailer Five Below Inc (NASDAQ:FIVE) has had a mostly strong year on the charts. So far the shares have tacked on 28.9% year-over-year, and despite a recent fall, they’re seeing a floor of support at the historically supportive 160-day moving average. Also emerging as support has been the $119 level, which represents seven times the stock’s initial public offering (IPO) price of $17, and is near the round 20% year-to-date level. In other words, now seems to be the perfect time for bulls to explore FIVE.

New WKEND FIVE Chart

Despite the stock’s outperformance, Wall Street remains wary of FIVE, as the 2.81 million shares sold short account for over 5% of the stock’s float – even after short interest has fallen in recent months. More tailwinds could be ahead if these bears keep throwing in the towel.

FIVE’s front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) is 1.33. In other words, short-term options sentiment seems bearish, as a reading above 1.0 shows put open interest outweighing call open interest among near-the-money strikes in the June series.

Five Below has a Schaeffer’s Volatility Index (SVI) of 39%, which ranks in the 26th annual percentile, showing relatively low volatility expectations priced into near-term contracts.

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