Big Lots Stock Could Keep 2021 Momentum Going

The stock has attractively priced premiums at the moment, too

Mar 31, 2021 at 1:42 PM
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Retail name Big Lots Inc (NYSE:BIG) has climbed up the charts for the better part of the year with support from the 20-day moving average guiding shares higher since breaking out past their autumn 2020 highs. The $63.84 level, which is six times BIG's March closing low, and the $62.50 level, which is home to its pre-earnings close, also held as support last Thursday. Big Lots stock's +50% year-to-date level was supportive last week, too, making now a good time to speculate on the security's next move with call options.

BIG WT Repost

The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.65 stands higher than all other readings from the past year, and an unwinding of some of this pessimism could lead BIG higher, too. Plus, SOIR readings above 1.00 have historically led to pops in price action. 
Short sellers have been in covering mode of late, with short interest down 13.3% in the last two reporting periods. The 4.74 shares sold short still make up a hefty 13.7% of BIG's float, which could help the equity gain some upward momentum, should more of these shorts jump off the bearish bandwagon. 

Big Lots options can be had a bargain right now, per the security's Schaeffer's Volatility Index (SVI) of 52%, which stands higher than just 2% of readings from the past year, implying option traders are pricing in relatively low volatility expectations at the moment. Adding to this, BIG's Schaeffer's Volatility Scorecard (SVS) ranks at 91 out of a possible 100. This means the stock has tended to exceed these expectations -- a good thing for option buyers. Lastly, our recommended call option has a leverage ratio of 4.1 and will double in a 25.4% pop in the underlying equity.

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