Oil prices have been making headlines recently, flirting with multi-year highs amid concerns about the U.S. withdrawal from the Iran nuclear deal. As a result, several energy stocks have followed crude’s lead, including Oasis Petroleum (OAS). The shares of OAS have skyrocketed more than 50% in the past three months, yet near-term options remain a bargain – sending up a signal that preceded a huge rally for Oasis in the past.
Specifically, OAS tops our list of stocks that are trading near annual highs while simultaneously sporting attractively priced near-term options, as measured by the Schaeffer’s Volatility Index (SVI). The equity’s SVI of 43.6% sits in the bottom 2% of its annual range, suggesting OAS’ short-term contracts are pricing in bottom-of-the-barrel volatility expectations. The last and only other time this “options signal” flashed for OAS (going back to 2008), the shares went on to rally another 23.71% in the subsequent month, according to data from Schaeffer’s Senior Quantitative Analyst Rocky White.
At last check, Oasis stock was up 2.5% on the day, trading at $12.24. The security early notched an annual high of $12.28, and has almost doubled since its August lows, recently taking out a former speed bump in the $10.50-$11 area. Another 23.71% rally from current levels would put OAS around $15.14.
OAS gapped higher in mid-April, after J.P. Morgan Securities resumed coverage with an “overweight” rating and $16 price target. However, there’s still plenty of room on the bullish bandwagon. Currently, nine analysts following the energy stock maintain tepid “hold” or “strong sell” ratings. Another round of upbeat analyst attention could help propel the stock even higher.
Traders wanting to speculate on more short-term gains for OAS could consider the June 12 call, which is currently asked at just $0.75. Buyers of the call would profit the higher the shares surge north of breakeven at $12.75 – just a stone’s throw from current levels – before June-dated options expire.