Fossil stock has exceeded options trader's volatility expectations over the past year
Retail stocks have been making notable move this week, including apparel concern -- and watchmaking rival to Apple (AAPL) -- Fossil Group Inc (NASDAQ:FOSL). Below we will see how FOSL has been faring on the charts, as well as to why now may be an affordable time to bet on the stock's next leg higher, per data from Schaeffer's Senior Quantitative Analyst Rocky White.
At last check, FOSL was fractionally lower at $30.58, after earlier touching a fresh annual high of $32.17. The stock has been a long-term outperformer on the charts, most notably gapping higher back in mid-February following a post-earnings surge. FOSL is up an impressive 208% year-over-year.
Fossil stock's Schaeffer's Volatility Index (SVI) is docked at 58% -- in the 8th annual percentile, meaning premium on short-term options contracts is relatively cheap at the moment, from a volatility perspective. According to White, the one other time since 2008 where FOSL was trading near 52-week highs with its SVI ranked in the 20th annual percentile or lower, the stock rallied 58.4% over the next month. Another rally of this magnitude would put Fossil shares around $48.67 by the second half of July.
This time around, a short-squeeze rally could help FOSL reproduce its impressive gains following the last such "low volatility/high stock price" signal. Short interest accounts for 28.5% of the stock's float, and would take 9.4 days to fully cover, at the equity's average daily trading volume. As the shares break out to new highs, we could see the weaker bearish hands start to hit the exits.
Lastly, Fossil stock's Schaeffer's Volatility Scorecard (SVS) currently sits at a 95 out of 100. This lofty ranking suggests that FOSL has handily exceeded the volatility expectations priced into its options during the past 12 months -- solidifying the notion that this stock is a rewarding target for prospective call options buyers.