Dropbox Stock Shows Strength Despite Broad-Market Headwinds

Dropbox options are on sale right now, too

Research Dept.
Jun 24, 2020 at 12:02 PM
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File sharing name Dropbox Inc (NASDAQ:DBX) has shown resiliency on the charts, pushing higher despite broad-market headwinds and a late-March downgrade from Goldman Sachs. A recent pullback was cushioned by support at the $21 level, which happens to coincide with DBX’s initial public offering (IPO) price. The stock has since reclaimed the $22 region -- half Dropbox stock’s 2018 all-time high – and now boasts a 29% year-to-date lead.

DBX Jun 19

Despite this positive price action, shorts have been piling on the security. Short interest nearly doubled in the last month and now represents a healthy 8.1% of DBX’s available float, which could push the stock higher should some of this pent up pessimism start to ebb. Digging deeper, a large amount of call open interest at the 24-strike is about to expire, removing a layer of potential overhead resistance.

What’s more, Dropbox options can be had at a premium right now. The stock’s Schaeffer’s Volatility Index (SVI) of 46% sits higher than just 15% of readings from the past 12 months. This means options players are pricing in relatively low volatility expectations at the moment. Lastly, our recommended call option has a leverage ratio of 4.0, and will double in value on a 25% pop in the underlying security.

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