Weekend Trader Alert
August 14, 2022
Open Positions Update
- Please extend the scheduled time-stop date on the Academy Sports and Outdoors (ASO) October 21, 2022, 37-strike call to Monday, August 29.
The following is this week's recommendation:
Church & Dwight (CHD)Place a limit order to buy the Church & Dwight (CHD) October 21, 2022 90-strike put at a limit price within range of the current market asked price when you place your order. At the close on Friday, August 12, this option was offered at $4.00. CHD closed at $87.70 on Friday, August 12.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, September 12, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Household product name Church & Dwight (CHD) is rolling over from a small bear flag, though its shares are failing at the 100-day moving average, which has been a significant trendline for the stock’s 10-year bull rally. Plus, with the stock breaking down below its Covid-era Anchored Volume Weighted Average Price (AVWAP), and the 90-strike call acting a level of resistance, now might be the perfect time to speculate on CHD’s next move with puts.
A further unwinding of bullish sentiment among options traders could also pressure the equity lower. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) recently rolled over from a 10-day call/put volume ratio of 9.47, which sat higher than 97% of readings from the last year. Similar surges in this ratio have pointed to negative price action in the past.
Puts are looking like the way to go, too. Church & Dwight’s Schaeffer’s Volatility Index (SVI) of 20% stands higher than only 20% of readings from the past year. This implies that options traders are pricing in relatively low volatility expectations of late. What’s more, the stock’s Schaeffer’s Volatility Scorecard (SVS) sits at 76 out of a possible 100, meaning the stock has tended to outperform said volatility expectations.
Finally, our recommended October 90 put has a leverage ratio of 12.9 and will double in a 6.9% drop in the underlying equity.
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