Insurance stock CB has short squeeze potential
Subscribers to Schaeffer's Weekend Trader options recommendation service received this CB 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.
Insurance stock Chubb Ltd (NYSE:CB) is breaking out to weekly highs after being range-bound since May, when Warren Buffett’s Berkshire Hathaway (BRK) disclosed a position in the company. The equity recently conquered the 20% year-to-date level, which had been capping its price action, making this a great opportunity to buy calls.
Short interest has increased 31.8% over the past month, but with the stock’s recent breakout there is potential for shorts to start covering their bets. Plus, 12 of 24 analysts in coverage still call CB a tepid "hold" or worse, indicating there’s still plenty of pessimism left to unwind, which may boost the shares.
Now looks like an excellent time to weigh in on Chubb stock's next moves with options. This is per its Schaeffer's Volatility Index (SVI) of 15% that sits in the low 12th percentile of its 12-month range, meaning options traders are pricing in low volatility expectations.
Our recommended November call has a leverage ratio of 12.3, and will double on an 8.5% pop in the underlying security.