Call Traders Could Use This Retail Stock to Profit

The security could attract bull notes

Jun 7, 2024 at 5:06 PM
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Subscribers to Schaeffer's Weekend Trader options recommendation service received this BJ 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.

BJ's Wholesale Club Holdings Inc (NYSE:BJ) stock broke out above $80 after the retailer’s earnings report, a level that is also the site of 2022 highs. Follow-through buying then pushed the shares above $85, or five times their initial public offering (IPO) price of $17 back in 2017. Now looks like an excellent time to bet on a move higher, given its mild pullback and relative strength amid this week’s broad-market selloff.

Despite being fresh off all-time highs, analysts are bearish toward the stock, with 10 of 19 in coverage maintaining a “hold” or worse rating. This leaves ample room for bull notes, which would generate additional tailwinds. The security could also benefit from a short squeeze, with short interest up 370% since the end of 2022 and accounting for a whopping 44.5% of its available float.
 
It’s also worth noting that implied volatility (IV) of 23% for the shares is below 63-day historical volatility (HV) of 34%. Our recommended August call has a leverage ratio of 8.9 and will double on a 11.1% pop in the underlying equity.

 

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