This Pizza Stock Is a Solid Bet for Options Bulls

The shares of Papa John's Int'l, Inc. (NASDAQ:PZZA) are breaking out in a flag pattern, with support from the 20-day moving average, as well as the +50% year-to-date level. What’s more, the stock is surging back above its September highs, after reporting a quarterly top- and bottom-line beat in November, and hiring more than 20,000 employees this year. In other words, now seems like a great time to bet on a move higher for PZZA.

 

Though the brokerage bunch is already mostly optimistic towards Papa John’s stock, there is still plenty of room for upgrades. Of the 14 analysts in coverage, nine call PZZA a “strong buy,” while five say “hold.” Should some of these firms start to change their tune, the equity could surge even higher.

A sentiment shift over in the options pits could create additional tailwinds for the security. This is per PZZA’s 50-day put/call volume ratio of 1.51 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 76% of readings from the past 12 months. This means long puts have been getting picked up at a much faster-than-usual pace in the last two months.

The equity sports affordably priced premiums at the moment, too. This is per PZZA’s Schaeffer's Volatility Index (SVI) of 32%, which sits higher than 19% of readings from the past year. To put it simply, options players are pricing in relatively low volatility expectations right now.

Our recommended call has a leverage ratio of 5.3, and will double in value on an 19.6% rise in the underlying equity.