Call Traders Need to Hop On This Outperforming RV Stock

Near-term options on Winnebago stock look affordable right now

by Research Dept.

Published on Jul 16, 2019 at 9:45 AM
Updated on Jul 16, 2019 at 9:45 AM

Shares of RV manufacturer Winnebago Industries, Inc. (NYSE:WGO) have been outperforming on the charts over the past few months, and have spent 2019 in a channel of higher highs and lows. Following the company’s June earnings, the stock pulled back to its 50% year-to-date level, and has since bounced higher. Against this backdrop, and with the equity experiencing support at its 14-day Relative Strength Index (RSI) level of 50, now is the perfect time to bet on WGO’s next leg higher.

WKEND WGO Chart

Looking at options, the security's 50-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is a bearishly skewed 1.24, and ranks in the 80th percentile of its annual range. An unwinding of these positions could also help the stock. This sentiment is echoed by the stock’s Schaeffer's put/call open interest ratio (SOIR) of 2.52, which ranks in the 90th annual percentile. Historically, SOIRs above 2.0 have preceded notable rallies for WGO.

While short interest on WGO dropped 9.2% during the past two reporting periods, it still accounts for 15% of the stock’s total available float. Plus, it would take shorts nearly 10 days to buy back their bearish bets, at the security’s average daily volume -- indicating more short covering could create a lift for the shares.

Winnebago has a Schaeffer’s Volatility Index (SVI) of 39%, which ranks in the 10th annual percentile, showing relatively low volatility expectations priced into near-term contracts.

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