Tech Stock Could Bound Higher This Month

Now looks like a good time to speculate on PLAN's next move with options

Dec 3, 2020 at 12:24 PM
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I.T. services and consulting firm Anaplan Inc (NYSE:PLAN) scored an earnings and revenue beat while raising its guidance on Tuesday. Now up 31% in 2020, that post-earnings pop took PLAN above former resistance at $65, and past the $68 level, which is roughly four times its initial public offering (IPO) price of $17.

PLAN Dec 3

There’s reason to believe the stock could move even higher. Tailwinds could come from a shift in analyst sentiment, considering the majority of analysts in coverage maintain “hold” or worse ratings. The equity is also ripe for a short squeeze. Short interest increased by 20.7% in the two most recent reporting periods, and the 22.04 million shares sold short account for 18.1% of PLAN’s total available float. At the stock’s average pace of trading, it would take shorts almost two weeks to buy back their bearish bets.

Put traders continue to pile on, with PLAN’s 20-day put/call volume ratio on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) above 0.50. Previous moves above 0.50 (mid-November 2019 and the pandemic lows of March) have led to sharp moves higher from the stock. Plus, the security's Schaeffer's Volatility Index (SVI) of 49% sits in the 13th percentile of its annual range. This means option traders are pricing in relatively low volatility expectations at the moment. Our recommended call has a leverage ratio of 6, and will double in value on a 15.6% rise in the underlying security.

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