Why Options Bulls Should Get in on WPM's Breather

WPM's options are attractively priced at the moment

Sep 9, 2020 at 10:33 AM
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Gold and silver name Wheaton Precious Metals Corp (NYSE:WPM) is experiencing a pennant formation on the charts, just after peaking near the +100% year-to-date level. The equity also hit a fresh record high near $58 early last month, and since, has pulled back to its supportive 50-day moving average. This breather for WPM makes it the perfect time to buy calls.

WPM Sept 8

Analyst sentiment surrounding Wheaton Precious Metals is leaning pessimistic. Of the nine in coverage, four still call it a tepid "hold" or "strong sell." Plus, the 12-month consensus price target of $54.89 is runs at only a slight premium to current levels. In simpler terms, WPM looks well overdue for a fresh round of upgrades and/or price-target hikes.

Big open interest is prominent at the stock's 50-strike put, which could be a mode of support for the shares. Further, WPM's Schaeffer's put/call open interest ratio (SOIR) higher than 85% of all readings from the past year, implying short-term options traders have been more put-biased than usual. An unwinding of this bearish sentiment could help the equity pivot even higher on the charts.

Lastly, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 78 out of 100, meaning WPM has tended to exceed option traders' volatility expectations during the past year. The equity's Schaeffer's Volatility Index (SVI) of 51% also stands higher than just 33% of all other annual readings, meaning the stock sports attractively priced premiums at the moment.

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