Short-term options premiums on CBOE look relatively cheap at the moment
Exchange operator Cboe Global Markets Inc (BATS:CBOE) is up 21% year-to-date, outperforming the broader S&P 500 Index (SPX). The shares are now consolidating above their most recent earnings close, as well as the historically supportive 20-day moving average, giving us the perfect opportunity to jump on CBOE’s next leg higher.
Looking at the options pits, the equity's 10-day put/call volume ratio comes in at 2.94 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ranks in the 99th annual percentile, meaning puts have been bought to open over calls at a near-annual high pace.
Short interest on CBOE had increased more than 52% from its April lows through the end of July, but these bearish bets fell by 18% in the most recent reporting period. A continuation of this short covering should help push the stock higher.
Finally, short-term options premiums on CBOE look relatively cheap at the moment, based on the equity's Schaeffer’s Volatility Index (SVI) of 20%, which ranks in the 25th percentile of its annual range. Our recommended call has a leverage ratio of 8.3, and will double in value on an 11.8% rise in the underlying security.
Subscribers to Schaeffer's Weekend Trader options recommendation service received this CBOE commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.