Another post-holiday slump could rattle some near-term options traders
During the current bull market, the shortened Memorial Day week has been a rough one for stocks. What's more, some equities tend to fare worse than others during that four-session stretch, including financial stocks SunTrust Banks, Inc. (NYSE:STI) and Fifth Third Bancorp (NASDAQ:FITB). Below, we take a look at the 25 worst stocks to own the week of Memorial Day.
Looking at S&P 500 Index stocks over the past 10 years -- and considering only stocks with at least eight years' worth of returns -- a handful of bank names made the list. STI and FITB have ended the week lower 80% of the time, averaging losses of 2.49% and 2.07%, respectively, per data from Schaeffer's Senior Quantitative Analyst Rocky White. (Meanwhile, these 25 stocks tends to outperform after the long weekend.)
SunTrust Banks shares shot higher to start 2019, but ultimately ran into a wall in the $66-$67 area. This region acted as a floor for STI for most of 2018, and is in the vicinity of the equity's 320-day moving average. At last check, STI is up 0.2% to trade at $62.14.
Should the bank stock once again take a dip after the long holiday weekend, several short-term options traders could be caught off-guard. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.27 indicates that call open interest nearly quadruples put open interest among options slated to expire within three months. What's more, this ratio sits at the bottom of its annual range, meaning STI's near-term traders haven't been more call-heavy during the past year.
In any case, now is an opportune time to speculate on STI's short-term trajectory with options. The security's Schaeffer's Volatility Index (SVI) of 22% is higher than just 21% of all other readings from the past 12 months, suggesting near-term options are pricing in relatively modest volatility expectations for the underlying shares.
Fifth Third stock, meanwhile, started 2019 in similar fashion, and ran into its own technical wall in the $29 neighborhood. This area rejected FITB's advances back in March, and again in early May. It's also home to the equity's 320-day moving average. In afternoon trading today, FITB stock is up 0.5% to trade at $27.15.
Again, another post-Memorial Day slump for the bank shares could rattle some near-term options traders. The security's SOIR stands at just 0.13, indicating a massive call skew among options expiring within three months. This ratio sits in just the first percentile of its annual range, underscoring the bigger-than-usual call-bias among the short-term options crowd.
Digging deeper, peak open interest across all series stands at the overhead June 28 call, with nearly 32,500 contracts outstanding. For context, the next most-populated strike is the June 29 call, home to about 9,100 calls. In the short term, this abundance of call open interest overhead could translate into an added layer of options-related resistance for FITB shares.