How ETN Could Benefit from Pent-Up Pessimism

Betting on Eaton stock's next move higher with options could be a prudent play, too

Feb 17, 2021 at 2:05 PM
facebook X logo linkedin

Eaton Corporation (NYSE:ETN) has been on a steady tear higher, doubling from its March coronavirus-induced lows. Now, after a pullback to support at the 40-day moving average, it looks like ETN is poised to add to its 19% year-over-year gains.

ETN feb 17

Analysts are mostly hesitant on Eaton Corporation stock, even after the company's Feb. 2 earnings and revenue beat. More specifically, seven of the 13 in coverage carry a "hold" rating on ETN, leaving plenty of room for increased optimism that could push the stock higher.
There is some pessimism in the options pits as well, per ETN's 10-day put/call volume ratio of 1.23 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 60% of readings in its annual range, suggesting puts have been picked up a slightly quicker-than-usual clip during the last two weeks.

That said, speculating on ETN's next move with options could be a prudent play. The stock's Schaeffer's Volatility Index (SVI) of 25% stands higher than just 7% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. Lastly, Our recommended call has a leverage ratio of 7.6, and will double in value on a 12.1% rise in the underlying security.

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


Unlock Weekend Profits with Chris Prybal's Favorite Strategy Up +487.5% in 2024

With the markets going left, right, and sideways, you need to have a plan now more than ever. 

Expert Trader Chris Prybal is no stranger to volatility, and has mastered finding big stock rallies while other traders aren't looking over the weekend. Rallies that produced gains like +207% on RTX calls, +236% on MARA calls, and +238% on NET calls.

A few simple moves on Sunday at 7pm could be the “Secret Sauce” your portfolio needs to not just stay afloat, but make unprecedented gains in this turbulent market.

Don’t sit on the sidelines, beat the market with Chris Prybal's strategy. Join him now!




Rainmaker Ads CGI