Bitcoin Adjacent Stock for Bulls to Buy Now

Highly correlated to Bitcoin, SQ has plenty of room to run as analysts are currently pessimistic on the cryptocurrency

Jun 16, 2021 at 2:47 PM
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Online business support name Square Inc (NYSE:SQ) appears to be bouncing off support at the 200-day moving average. Highly correlated to Bitcoin (BTC), the stock has plenty of room to run as analysts are currently pessimistic on the cryptocurrency.


sq jun 16

There is space for increased optimism in the options pits as well. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.21 sits in the 83rd percentile of its annual range, meaning short-term options traders have been more put-biased than normal. The big weekly 220 call just expired, too, removing a layer of potential resistance. Furthermore, SQ's front-month gamma-weighted SOIR sits at a top-heavy 1.13, meaning near-the-money puts outweigh calls among options expiring in the standard July series.
Plus, Square stock could benefit from a short squeeze, as shorts may look to cover given SQ's technical strength lately. Shorts have been piling on at much lower price levels, and short interest represents 8.1% of the stock's available float, or over three days' worth of pent-up buying power.
Lastly, now looks like a good time to weigh in on SQ's next move with options. The stock is seeing attractively priced premiums at the moment, per Square stock's Schaeffer's Volatility Index (SVI) of 42%, which sits in just the 3rd percentile of its annual range. The equity has tended to exceed these volatility expectations during the past year as well, indicated by the security's Schaeffer's Volatility Scorecard (SVS), which stands at a high 98 out of 100. Our recommended call has a leverage ratio of 5.5, and will double in value on a rise of 18.4% in the underlying security.

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