The modest cost of entry on near-term ADSK options means you can take full advantage of leverage to profit from another surge higher by the stock, says Elizabeth Harrow, at Schaeffer’s Investment Research.
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AutoCAD software parent Autodesk (ADSK) gapped higher in late August after announcing a slimmer-than-expected quarterly loss. Since that Aug. 25 earnings-day peak just shy of the $120 level, the shares have consolidated some gains, with ADSK currently hovering around the $111 level.
However, the stock's meet-up with a key moving average suggests that now is an opportune time to bet on ADSK's next leg higher -- particularly with near-term option premiums lingering near annual-low levels.
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Schaeffer's Senior Quantitative Analyst Rocky White notes that ADSK is currently trading less than one standard deviation from its 80-day moving average. The shares have consistently traded above this trendline since mid-July 2016 -- and previous pullbacks to the 80-day have proved to be rewarding buying opportunities for bulls.
In fact, on the seven previous such signals, ADSK was higher five days later 100% of the time, with an average return of 5.79% over this time frame. And looking out 21 days after a signal (roughly one month's worth of trading), ADSK boasts an average return of 5.20%, with 86% of those returns in the positive column.
Options traders seem fairly unmoved by this bullish chart signal for ADSK, with Trade-Alert noting that put open interest on the software stock stands at 34,050 contracts -- in the 82nd annual percentile. By contrast, call open interest is in the middling 59th percentile, at 65,691 contracts.
The healthy demand for ADSK puts has pushed the 30-day implied volatility (IV) skew up to 9.1%, in the 88th annual percentile, which means that now is a particularly inopportune time to invest in ADSK put options.
However, for those looking to capitalize on a likely bounce from long-time trendline support, call options remain attractively priced, from a volatility perspective.
Currently, Trade-Alert puts ADSK's 30-day at-the-money IV at 27.1%, which registers in the low 11th percentile of its annual range. The modest cost of entry on near-term ADSK options means you can take full advantage of leverage to profit from another surge higher by the stock.
