Why ETSY Should be Option Bulls' Next Pick

Support at the 80-day moving average could keep the wind on ETSY's back

Sep 30, 2020 at 10:38 AM
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Online small business retailer Etsy Inc (NASDAQ:ETSY) has surged an impressive 165% in 2020, and was one of the few stocks that maneuvered the aftermath of the mid-March broader market selloff with ease. Now, the equity is in a wedge-like pattern on the charts, while also benefiting from solid support at the 80-day moving average and +100% year-over-year level. With this impressive foundation in place, now is the perfect time to buy calls.

ETSY Sept 30

In the options pits, peak put trading is evident at the 120-strike, with a handful of overhead calls set to expire over the next few weeks. An unwinding of this pessimism in the options pits could act as a tailwind going forward. What’s more, short sellers look to be in covering mode, and the 6.49 million shares sold short now account for 5.5% of the stock’s total available float.

The good news for options traders is that the stock’s Schaeffer’s Volatility Index (SVI) of 61% sits higher than just 25% of all other annual readings, meaning options traders are pricing in relatively low volatility expectations at the moment. Plus, ETSY’s Schaeffer's Volatility Scorecard (SVS) ranks at an 90 out of 100. This means the equity has tended to exceed these expectations during the past year.

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