TD Ameritrade: An Option for Traders

03/18/2014 7:00 am EST


For her latest Options Trade of the Week, technician and contrarian Karee Venem looks to a securities brokerage firm. Here’s the latest from Schaeffer Investment Research.

TD Ameritrade Holding Corp. (AMTD) has put in a solid performance on the charts over the past 12 months, with the shares up more than 69%.

Longer-term, the equity has enjoyed a double-barreled lift from its 10- and 20-week moving averages since November 2012. More recently, this pair of trendlines contained the stock's brief consolidation after AMTD hit an earnings-induced high of $35.16 on January 21.

Despite this consistently strong display of price action, sentiment surrounding the investment issue has tended toward the bearish side—which could have contrarian implications down the road.

AMTD has racked up a 50-day put/call volume ratio of 1.05, which ranks in the 91st percentile of its annual range. Simply stated, puts have been bought to open over calls with more rapidity just 9% of the time within the past year.

In the front-month series, peak put open interest can be found at the March 30 strike; in the near term, this round-number level, which coincides with the stock's 20-week moving average, could serve as a layer of options-related support for AMTD, as the hedges related to these puts unwind over the next two weeks. Sentiment is skeptically skewed outside of the options arena, as well. Short interest jumped almost 31% over the past two reporting periods, and now accounts for 7.88 million shares sold short—the loftiest amount since last August.

Going forward, a capitulation among short sellers in the face of AMTD's impressive price action could help fuel the security's fire. It should also be noted that AMTD's ability to notch a record peak in the midst of this selling pressure speaks volumes to its underlying strength.

Meanwhile, six out of 13 covering analysts maintain a tepid "hold" rating on the outperforming equity, and the consensus 12-month price target of $34.63 stands at a discount to the stock's current perch at $34.71.

A round of well-deserved upgrades and/or price-target hikes could create a fresh wave of buying power for AMTD, helping extend its quest into record-high territory.

Those wishing to bet on additional gains for TD Ameritrade Holding could consider buying the August 30 call. This in-the-money option was last seen sporting an ask price of $5.60.

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