TOL is entering its most seasonally bullish period of the year
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Homebuilding stock Toll Brothers (NYSE:TOL) has newfound support at its 20-day moving average, after catching up and clearing a one-month range last week between $155-$156. Plus, shares are now breaking above its +50% year-to-date mark.
It’s also worth noting that two key contrarian signals are flashing, with options traders and analysts both more bearish despite the homebuilding sector’s outperformance.
Specifically, seven of 19 analysts in coverage rate Toll Brothers stock a “hold” or worse. Plus, its 10-day put/call volume ratio of 1.79 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 84% of readings from the past 12 months.
Options are affordably priced as TOL enters its most seasonally bullish period of the year. This is per its Schaeffer’s Volatility Scorecard (SVS) tally of 81 out of 100, which implies it’s tended to exceed options traders’ volatility expectations in the past year.
Our recommended call has a leverage ratio of 6.5, and will double on a 16.3% rise in the underlying shares.