Honeywell Stock Ripe for an Unwinding of Bearish Sentiment

HON shares have regularly made bigger moves than options traders were pricing in

Dec 17, 2019 at 11:08 AM
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North Carolina-based Honeywell International Inc. (NYSE:HON) has been outperforming on the charts long term, and is now breaking out of a bull flag pattern. The stock also recently came off a convergence of its 80-day and 160-day moving averages, signaling that now is the perfect time to bet on HON with calls.

WKEND Chart HON

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 1.07, and ranks in the 98th percentile of its annual range -- showing an unusual put-skew. The stock also looks to have been a good target for premium buyers in the past year, based on its Schaeffer's Volatility Scorecard (SVS) of 93 (out of 100). This means the shares have regularly made bigger moves than options traders were pricing in during the last 12 months.

Lastly, short-term options premiums on Honeywell International look relatively cheap at the moment, based on the equity's Schaeffer’s Volatility Index (SVI) of 17%, which ranks in the 18th percentile of its annual range. Our recommended call has a leverage ratio of 10.51, and will double in value on an 9% rise in the underlying security.

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