Newell Options Run Hot After Upgrade

Newell is struggling to fill a mid-February bear gap

Sep 30, 2019 at 3:07 PM
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SunTrust Robinson upgraded Newell Co (NASDAQ:NWL) stock to "buy" from "hold," and lifted its price target by $10 to $25 -- the highest on Wall Street, according to Refinitiv data. The brokerage firm said it expects the Sharpie maker's turnaround plan to continue into next year, and waxed optimistic over an end to the company's "misguided" divestiture program. In reaction, NWL stock is up 3.4% at $18.81, and options volume is running hot.

With just under two hours left in today's trading, around 9,100 calls and 4,200 puts have changed hands, three times what's typically seen at this point. The November 18 put is most active, and it looks like new positions are being purchased here. If this is the case, speculators are bracing for a retreat back below $18 by November options expiration. This could also be indicative of shareholders protecting paper profits with an options hedge.

On the call side, the 20 strike is popular, with buy-to-open activity detected in both the monthly October and November series. By purchasing these calls, options traders are betting on a round-number breakout over the next several weeks. The last time NWL stock traded north of $20 was before a mid-February bear gap.

That bear gap was sparked by Newell's quarterly revenue miss and weak guidance, and the stock went on to sink to a seven-year low of $13.04 by late May. Today's pop has the equity nearly filling that gap, and pacing toward its first close north of its 320-day moving average since August 2017.

nwl stock daily price chart on sept 30

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