The Chinese video sharing stock is sporting historically low implied volatility
The shares of Bilibili Inc (NASDAQ:BILI) are up 7.2% at $101.70 at last check, after hitting an all-time-high of $103.65 earlier today. What's more, the security is enjoying a 338.9% year-over-year lead, with support from the 20-day moving average over the past several weeks. And now, a historic bullish signal is flashing, indicating even more upside may be in store for BILI in the near future.
Specifically, the stock's recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for the equity in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have only been three other times in the past five years when BILI was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th percentile of its annual range or lower. This is the case with the security's current SVI of 64.8%, which sits just above the 18th percentile of its 12-month range.
White's data shows a month after these signals, Bilibili stock was higher, averaging a 27.2% return for that time period. From its current perch, a move of similar magnitude would put BILI slightly over the $129 mark, at an even higher record than today's peak.
Digging deeper, the security could still benefit from a short squeeze, which would push shares even higher. Short interest rose 8.4% in last two reporting periods, and the 25.45 million shares sold short make up 10.6% of the stock's available float, or over a week's worth of pent-up buying power.
An unwinding of pessimism in the options pits could also keep the wind at the equity's back. This is per the stock's Schaeffer's open interest ratio (SOIR) of 1.40, which stands in the elevated 97th percentile of its annual range, indicating short-term option traders have rarely been more put-biased.
Now could be a good opportunity to take advantage of BILI's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 69% sits in the low 24th percentile of its annual range, indicating the equity sports attractively priced premiums at the moment.
Lastly, the security's Schaeffer's Volatility Scorecard (SVS) sits at an elevated 79 out of 100. In other words, BILI has exceeded option traders' volatility expectations during the past year -- a boon for options buyers