Call Traders Should Keep This Tech Stock Close

Short-term options premiums on Seagate Technology look cheap at the moment

Nov 19, 2019 at 12:37 PM
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Computer hardware specialist Seagate Technology PLC (NASDAQ:STX) has been steadily climbing the charts in 2019. In fact, despite a slight pullback after earnings in early November, the equity still stands 53% higher year-to-date. The 40-day moving average has been a line for support for the shares, catapulting the stock to Friday’s annual high of $59.48, or more than three times its 2016 lows. This said, now looks to be the perfect time to buy calls.

WKALT Chart STX

Short interest has been rising alongside STX shares of late. Specifically, a more than 11% lift was seen during the past two reporting periods, signaling that ample sideline cash is available to help keep the wind at the equity's back. Plus, 14 of the 17 covering firms still sport a tepid "hold" or worse rating, meaning there remains plenty of room for upgrades on the stock.

Digging deeper, there looks to be more pessimism ready to be unwound in the options pits. The stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.95, meaning short-term speculators are extremely put-heavy on Seagate Technology.

Plus, short-term options premiums on Seagate Technology look relatively cheap at the moment, based on the equity's Schaeffer’s Volatility Index (SVI) of 24%, which ranks in the bottom percentile of its annual range. Our recommended call option has a leverage ratio of 7.2, and will double in value on a 14% rise in the underlying security.

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