Real Estate Stock Could Be Lifted By Short Squeeze

The equity is up an impressive 84% year-to-date

Jul 22, 2020 at 10:34 AM
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Real estate concern Redfin Corp (NASDAQ:RDFN) has enjoyed a steady rise on the charts -- up 84% year-to-date -- though it’s pulled back somewhat in the last week. However, that pullback has bounced off its ascending 40-day moving average, a level that coincides with its 100% year-over-year gain.

RDFN Chart July 17

Still, the majority of analysts are approaching RDFN with some skepticism, so a shift in analyst attention could be a boon for the equity. Of the 16 in coverage, eight sport a tepid “hold” rating, with one “sell” as well. Plus, the consensus 12-month price target of $31.69 is a significant 19% discount to current levels.

Meanwhile, the number of shares sold short represent 12.6% of the stock’s available float. At RDFN’s average daily trading volume, it would take over a week to buy back these positions, meaning a short squeeze could fuel additional gains.

The good news for options traders is that the security’s Schaeffer's Volatility Index (SVI) of 78% stands higher than 24% of all other readings from the past year – which implies near-term option traders are pricing in relatively low volatility expectations. Plus, RDFN’s Schaeffer's Volatility Scorecard (SVS) sits at a relatively high 81 (out of 100), meaning the stock has tended to exceed option traders' volatility expectations during the past year, a good thing for option buyers.

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