Options Bulls Blasting Square's Earnings Beat

There is still an overwhelming amount of pessimism among the brokerage bunch

Digital Content Manager
Aug 10, 2020 at 11:45 AM
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Thanks to data courtesy of Schaeffer's Senior Quantitative Analyst Rocky White, we have a list below comprised of 20 stocks that have attracted the highest weekly options volume over the last 10 trading days, with new additions highlighted in yellow. One stock that just landed on the list is Square Inc (NYSE:SQ), with options traders undoubtedly responding the the firm's second-quarter earnings beat last Tuesday, Aug. 4, and subsequent all-time-high of $158.43 a day later.

While SQ has cooled a bit since then -- off 3.2% at $142.48 in today's trading -- it looks like options players are still overwhelmingly call-heavy. So far today, 31,000 calls have been exchanged, nearly double the 18,000 puts that have crossed the tape in the same time period. The weekly 8/14 155-strike call is the most popular, followed by the 150-strike call in the same series, with positions being opened at both.

A broader look shows a similar penchant for bullish bets over the past 10 days. During the past two weeks, 385,508 calls were traded, compared to 170,115 puts. The most popular position during this time period was the 8/7 160-strike call, which expired last Friday, Aug. 7, with 32,469 contracts traded.  

Most Active Options Aug 10

Last month, we discussed Square in the context of its Schaeffer's Volatility Scorecard (SVS), which at the time sat at 98 out of 100. This means the stock has tended to exceed option traders' volatility expectations during the past year -- a boon for options buyers. The security's SVS hasn't strayed far from this reading since, and now sits at a reading of 95. 

The stock is hovering north of its pre-bull gap levels below the $140 level, and it looks as if solid support at the 20-day moving average could help catch any further pullbacks the security might be facing. And while SQ is coming off a small weekly loss of 4.1%, the equity still boasts a year-to-date lead of 128.1%. 

SQ chart Aug 10

This could be enough to convince analysts to upgrade their positions on the tech stock. Currently, 21 still call the security a "hold" or worse, compared to 13 "buy" or better ratings. Plus, the consensus 12-month price target of $135.29 is a 5.3% discount to current levels. 


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