Travel Stock With Multiple Layers of Support in Place

Options traders are pricing in low volatility expectations to boot

Dec 6, 2023 at 12:20 PM
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Subscribers to Schaeffer's Weekend Trader options recommendation service received this ABNB 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.

Travel platform stock Airbnb Inc (NASDAQ:ABNB) is breaking out of a cup and handle pattern above $130, which had acted as a pivot point since the summer. The stock has additional support at a confluence of its 20-day, 50-day, and 200-day trendlines. The shares’ 80-day moving average is now in the rear view, as well as its longer-term 20-week moving average.
 
ABNB’s year-to-date anchored volume weighted average price (AVWAP) also has provided a floor over the last couple of weeks. With all of this technical support in place, now looks like a good time to weigh in on ABNB with calls.

 

 
An unwinding of pessimism in the options pits could provide tailwinds. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ABNB’s 50-day put/call volume ratio of 1.69 ranks in the 92nd percentile of its annual range, showing a strong penchant for puts over the past 10 weeks. A shift amongst analysts could also give the stock a boost, too, as 19 of the 29 brokerages in coverage carry a “hold” or worse rating on ABNB.
 
Options traders are in luck, as the security sports a Schaeffer’s Volatility Index (SVI) of 34%, which ranks in the 8th percentile of its annual range. This means options traders are pricing in very low volatility expectations at the moment. The stock tends to outperforms these volatility expectations, too, per its Schaeffer’s Volatility Scorecard (SVS) of 77 out of 100.
 
Our recommended call has a leverage ratio of 6.6 and will double on a 15.6% pop in the underlying shares.
 

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