Outdoors Sports Stock Has Room to Run

A shift in the options pits could lift the stock higher

Jul 19, 2022 at 2:16 PM
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Shares of Academy Sports and Outdoors Inc (NASDAQ:ASO) boast multiple tailwinds that make now the perfect time to speculate on its next leg higher. Specifically, the equity is breaking out of a downtrend connecting its November 2021 and April 2022 peaks, while also moving above the 200-day moving average with additional support from all notable trendlines.
 
In addition, the $39 area, which capped previous positive price action and stands more than three times the security's initial public offering (IPO) price, now sits solidly below the security's current level. What's more, ASO toppled its year-over-year breakeven level, and now boasts an 8.2% lead in the last 12 months.
 
ASO Stock Chart
 
Academy Sports and Outdoors stock could benefit from a shift in sentiment in the options pits, which currently favor puts. This is per the equity's 10-day put/call volume ratio of 0.76 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 95% of readings from the past year. In other words, while calls outpace puts on an overall basis, these traders are picking up puts a faster-than-usual pace.
 
The good news for those looking to speculate with options is they can be had for a bargain at the moment, per ASO's Schaeffer's Volatility Index (SVI) of 57%, which stands higher than 24% of readings in its annual range -- indicating options traders are pricing in low volatility expectations right now.

Our recommended October call has a leverage ratio of 4.1 and will double in value on a 24.4% pop in the underlying security.
 
Subscribers to Schaeffer's Weekend Trader options recommendation service received this ICE 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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