Rallying Singapore-Based Stock Could Have More Upside

Sea Ltd call options are seeing huge volume today

Jun 21, 2019 at 2:49 PM
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The shares of Singapore-based Sea Ltd (NYSE:SE) have tripled in 2019, spiking 6.3% just today to trade at $34.33, earlier hitting an all-time of $34.74. Call traders have been along for the ride, with more than 5,600 long calls initiated during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 490 puts. Looking closer, there was a huge addition in open interest at the June 32 call over this time frame, and the August 32 call saw a notable rise in open interest, as well.

Options volume is accelerated across the board this afternoon, and the July 34 call is seeing heavy trading, with new positions being opened. Total open interest was already at an annual high coming into today, while the 30-day at-the-money implied volatility of 50% ranks in the 21st annual percentile-- showing relatively tame short-term volatility expectations at the moment. Of course, this reading is up significantly today, jumping 15.2%.

Another volatility measure, our Schaeffer's Volatility Index (SVI), is low, too, ranking in just the 3rd annual percentile. Per data from Schaeffer's Quantitative Analyst Chris Prybal, the other two times the stock's SVI ranked in the bottom quartile of its annual range and the shares were trading near 52-week highs, they went on to average a one-month gain of 10.8%.

Aside from this signal, there is also the Garena parent's upcoming Call of Duty: Mobile launch that's expected for the third quarter, which could generate positive buzz for the stock. And investors should be paying attention when the company schedules its next earnings release, since the last two quarterly reports have sparked gains of 24.1% and 34.9%. Finally, all covering analysts recommend buying the shares, with J.P. Morgan Securities just last week giving SE stock an "overweight" rating and $36 price target.

 

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