Now looks like a good time to bet on Yeti's next move higher
The shares of Yeti Holdings Inc (NYSE:YETI) are outperforming the broader market, up more than 33% year-to-date. The equity has been trending higher over the past 12 months as well -- given its over 118% year-over-year lead -- and now sits above its pre-earnings close around the $90 mark, which is five times its initial public offering (IPO) price. With these factors in mind, we are recommending a new long position on YETI stock.
The security looks ripe for a short squeeze, too, which could push shares higher still. The 5.98 million shares sold short make up a significant 7.3% of the stock’s available float. It would take nearly a week to buy back these bearish bets, at YETI’s average daily pace of trading.
Additional tailwinds could come from a shift in the options pits, which lean bearish. This is per YETI’s 50-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands in the 95th percentile of its annual range. This suggests long puts have been more popular than usual over the past 10 weeks.
Now may be the perfect time to buy YETI premiums, which are affordably priced at the moment. The equity's Schaeffer's Volatility Index (SVI) of 41% sits in the 14th percentile of readings from the past year, indicating options players are currently pricing in low volatility expectations. Our recommended call has a leverage ratio of 4.6, and will double in value on a rise of 22.8% in the underlying security.
Subscribers to Schaeffer's Weekend Trader options recommendation service received this YETI 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.