All three financial stocks sport attractively priced options
Bank stocks could be in focus this week, with the Fed expected to raise interest rates at its meeting. Ahead of the event, a pair of American financial stocks are flashing "buy" signals: Huntington Bancshares Incorporated (NASDAQ:HBAN) and Zions Bancorp (NASDAQ:ZION). What's more, British-backed financial concern Royal Bank of Scotland Group (NYSE:RBS) stock could also be a bargain right now.
HBAN Options Are Attractively Priced
Huntington Bancshares stock recently appeared on our list of high-flying stocks with options at a bargain. Specifically, HBAN was within 2% of its 52-week high, and its Schaeffer's Volatility Index (SVI) was in the bottom 10% of its annual range -- indicating near-term options are pricing in relatively low volatility expectations.
Since 2008, there have been just two other signals of this kind for HBAN shares, per Schaeffer's Senior Quantitative Analyst Rocky White. The stock was higher one month later both times, averaging a healthy gain of 5.43%.
At last check, Huntington stock was down 1.5% with the broader equities market, trading at $15.83. The security has been in a channel of higher highs and lows since September, with recent pullbacks supported by its 60-day moving average, and it notched a 10-year high of $16.60 just last week. From current levels, a 5.43% pop would put HBAN around $16.69 -- in new-high territory.
Despite rallying more than 20% in the past six months, there's still plenty of room on HBAN's bullish bandwagon. Eight of 19 analysts maintain tepid "hold" ratings, leaving the door wide open for potential upgrades to lure more buyers to the table.
Meanwhile, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.51 is in the 92nd percentile of its annual range, suggesting near-term options traders are more put-heavy than usual. An unwinding of pessimism in the options pits could also be a boon for Huntington Bancshares stock.
Short Squeeze Could Add Fuel to ZION's Fire
Zions Bancorp stock has been in its own channel of higher highs and lows since May 2017. The stock touched a post-financial crisis high of $57.29 on March 12, and its recent pullback to the 40-day moving average could be a "buy" signal, if past is prologue.
The last 12 times ZION stock pulled back to this trendline after a lengthy stretch above it, the shares went on to average a one-month gain of 4.33%, per data from White. At last check, the security was down 1.6% to trade at $54.58.
A short squeeze could propel ZION shares even higher. Short interest represents more than 11% of the equity's total available float, or roughly two weeks' worth of pent-up buying demand, at the stock's average pace of trading.
A reversal in sentiment among options traders could also be a boon for the bank stock. While absolute volume is relatively light on ZION options, the stock's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.16 -- in the 74th percentile of its annual range.
However, near-term options traders can pick up Zions Bancorp contracts at a relative bargain. The security's SVI of 24% is higher than just 19% of all other readings from the past year.
RBS Stock Bounces Big From These Trendlines
While Royal Bank of Scotland shares may be more likely to move on Brexit-related chatter than Fed news, they recently pulled back to a pair of promising trendlines. Specifically, RBS stock is now within one standard deviation of both its 160-day and 200-day moving averages, retreating after touching an annual high of $8.74 in late January.
After the last two dips to its 160-day trendline, the stock was higher a month later both times, and up a whopping 11.71%, on average. After its last two retreats to the 200-day, RBS was also higher a month later both times, and rallied an average of 13.03%.
At last check, Royal Bank of Scotland stock was down 0.7% at $7.32. Another 13.03% rally from current levels would put RBS around $8.27 -- within striking distance of new highs.
As with HBAN and ZION, RBS' near-term options are attractively priced at the moment. The equity's SVI of 29% is in just the 24th percentile of its annual range, suggesting short-term contracts are underpricing volatility expectations.