Red-Hot Appliance Stock Could Keep Spinning Higher

Despite WHR's positive price action, there's still plenty of pent-up pessimism surrounding the equity

Aug 26, 2020 at 10:10 AM
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Appliance manufacturer Whirlpool Corporation (NYSE:WHR) is trading near multi-year highs, now up 22% in 2020. In Friday’s trading the equity stepped slightly below its recent August 19 peak of $185.96, making now the prime opportunity to buy WHR calls.

WHR Chart August 26

In the options pits, WHR sports a Schaeffer’s put/call volume ratio (SOIR) of 2.50, which ranks in the highest percentile of its annual range. This suggests puts have been heavily favored in recent weeks, leaving plenty of room for bearish sentiment to be unwound, which could send the equity even higher.

Despite this impressive price action, short interest still accounts for 11% of the stock’s total available float. In other words, it would take over eight days to cover these bearish bets at Whirlpool stock’s average pace of trading. Should some of this pent-up pessimism begin to retreat, shorts covering their bearish bets could provide additional tailwinds for the washing machine maker.

Looking at analyst sentiment, of the six in coverage, five rate the equity a tepid "hold" or worse. With just one "strong buy" rating on the books, there remains plenty of room for upgrades moving forward.

Lastly, the equity's Schaeffer's Volatility Index (SVI) of 33% stands in the 10th percentile of its annual range, implying near-term option traders are pricing in extremely low volatility expectations right now.

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