An Unwinding of Pessimism Might Send CBOE Higher

Analysts are well overdue for a fresh round of upgrades

Oct 8, 2019 at 11:47 AM
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A look at the chart for Cboe Global Markets Inc (BATS:CBOE) suggests it's a good time to go long on the long-time outperformer. The shares are bouncing strongly from support at the 80-day and 100-day moving averages, which are right near a trendline connecting higher lows since mid-April. The stock right now is holding right near the 20% year-to-date return level, another potential support area, and an unwinding of pessimism could help push the security higher again.

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The most notable data point on CBOE could be its Schaeffer's put/call open interest ratio (SOIR). This reading on Cboe Global Markets comes in at 1.58, putting it in the 98th annual percentile, showing that near-term options traders are unusually put-heavy right now. Should this indicator return to more "normal" levels, it could result in upside price action for the shares.

What's more, half the analysts covering the stock still have "hold" or worse ratings in place. Given the technical strength behind the equity, a round of upgrades wouldn't be surprising, and that could be another catalyst for a move higher in CBOE shares.

Implied volatilities have been moving lower, too, and the Schaeffer's Volatility Index (SVI) of 22% sits in the attractive 34th annual percentile, pointing to relatively muted volatility expectations right now. Meanwhile, our recommended call has a leverage ratio of 7.6, and would double in value on a 12.5% move higher for CBOE.

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