Schaeffer's Top Stock Picks for '25

3 Stocks Options Traders Should Be Targeting

SQ, ENPH, and GRUB all have high SVS'

Managing Editor
Jul 31, 2020 at 11:30 AM
facebook X logo linkedin


Schaeffer's Volatility Scorecard (SVS) is a lagging indicator that measures a stock's realized volatility against the volatility expectations priced into that stock's options over the past year. The goal is to find which stocks have been the best -- and worst -- for premium buyers. The SVS is a very useful tool for premium sellers too, as “the worst” for a premium buyer can be construed as “the best” for a premium seller.

Using our robust historical database, we conduct extensive research on each underlying equity and determined which of those underlying equities’ options have historically had underpriced or overpriced options. We rank each equity’s options relative to the others in our universe, with scores ranging from zero to 100. For more information on how to use these scores, please review instructions following the scorecard.

Below is deeper dive into three stocks that showed up on our comprised list; payments processing specialist Square Inc (NYSE:SQ), clean energy stock Enphase Energy Inc (NASDAQ:ENPH), and food delivery service GrubHub Inc (NYSE:GRUB).

What's the uniting thread between these three unique stocks? Right now SQ, ENPH, and GRUB all boast SVS' of 98, 100, and 96, respectively. In simpler terms, all three stocks have tended to exceed option traders' volatility expectations during the past year, a good thing for option buyers.

At last check, SQ was up 3.4% to trade at $127.75, a chip-shot from its July 9 record high of $133.81. The shares have almost quadrupled off their March 18 lows of $32.33, and have more than doubled year-to-date. During this channel of higher highs, the ascending equity's 20-day moving average has stepped as admirable support

Daily Stock Chart SQ

A short squeeze could be fueling the gains. Short interest fell off by 13.8% in the two most recent reporting period, yet still accounts for a healthy 8.2% of SQ's total available float. The security could also benefit from a shift in analyst sentiment, as 22 of the 35 in coverage still rate it a "hold" or worse.

Switching over to ENPH, the California-based solar energy name was last seen up 3.6% at $59.32. Like Square, Enphase stock has also more than doubled in 2020, but remain a ways off their May 19 record high of $70.36.

Daily Stock Chart ENPH

Enphase shorts have been headed for the exits, down 5.7% in the two most recent reporting periods. Yet that 11.63 million shares sold short still takes up 10.1% of ENPH's total available float, so a continued exodus of bearish bets could keep the wind at the equity's back.

And lastly there's GrubHub stock, which at last check was up 1.4% at $71.06. GRUB is up 109% in the last nine months, with its 30-day moving average containing the last month's consolidation on the charts. 

Daily Stock Chart GRUB

Now looks like a good time to get in on GrubHub with options, too. Despite its July 30 earnings report, GRUB's Schaeffer's Volatility Index (SVI) of 50% ranks in the 10th percentile of its annual range. This suggests options players have been pricing in relatively low volatility expectations of late. 

This article is an updated column that originally appeared on Stocknews.com.

 
 

Which of These SUB-$5 Stocks Could 26x From Here? (AD)

He called a rare 11x on Tesla…

Then he called a 26x on Workhorse…

Then an even rarer 35x on Nio Inc…

Now Tim Bohen says these 5 tiny “America First” stocks are next up in 2025.

They’re trading for less than $5 right now.

But thanks to Elon & Trump’s new alliance…

They could be off to the races in Trump’s first 100 days.

And right now for a limited time…

You can get the names & tickers for just $1 here. (AD)

10 Stock Picks FREE
 
 

Featured Articles from Trusted Partners:

🚀 One Stock Pick Could Change Everything in 2025
What if one stock pick could define your success next year? Get 10 expert-vetted stocks set for 2025—plus 5 bonus picks to watch now. Get the Report →

🆕 New Options Need New Trading Strategies
Zero-DTE options are the newest (and hottest) options to trade.  Professional traders have rushed into the market and are making a mint.  Don’t get left behind - learn all about these options, how to trade them, market setups to profit from, plus much more. Download now →

👀 Revealed: 3 Defensive Stocks for Your Portfolio
Worried about the market? This free report reveals 3 under-the-radar defensive stocks for uncertain times in any kind of economy.

 

 
 

FREE Report Download

 

Follow us on X, Follow us on Twitter