Options traders should consider selling SDC premium
SmileDirectClub, Inc. (NASDAQ:SDC) has had a disastrous 2021, racking up a 54% year-to-date deficit. The teledentistry company keeps wading deeper and deeper into penny stock territory, last seen trading at $5.49. Is there any potential of a rebound that investors might want to latch on to?
On Oct. 5, the dental care company announced the issuance of a patent on their SmileBus concept. According to SDC's latest press release, the patent is meant to strengthen protection for SmileDirectClub’s intellectual property as one of the methods for bringing premium, affordable, accessible oral care to more people through its telehealth platform.
It's no surprise that 33% of SDC's total available float is sold short, and not a single analyst rates the stock a "buy." Meanwhile, the shares' descending 80-day moving average has kept a lid on breakout attempts, and has been toppled on a closing basis only once since February.
From a fundamental point of view, SmileDirectClub stock is still a very speculative play. SDC’s growth was heavily impacted by the COVID-19 pandemic, with revenues dropping 12% between fiscal 2019 and fiscal 2020. Prior to that, SmileDirectClub had increased its revenues 414% between fiscal 2017 and fiscal 2019. However, the oral care company is not well positioned to continue funding growth with SDC's relatively weak balance sheet featuring $376.65 million in cash and $777.5 million in total debt.
It's also worth pointing out that SDC ranks low on the Schaeffer's Volatility Scorecard (SVS), with a score of just 26 out of 100. In other words, the security has consistently realized lower volatility than its options have priced in, making the stock a potential premium-selling candidate.