QSR has been in rally mode since mid-February
Burger King parents Restaurant Brands International Inc (NYSE: QSR) has been in rally mode since its last earnings report in mid-February, breaking the $ 56-58 region that saw big lows in 2016 and 2018, as well as the $ 59 level, which is a Fibonacci retracement of 61.8 % corresponds to the share’s high in 2018 to its low in 2020.
Despite this positive price movement, which could boost equity as these bearish bets begin to unwind, there is a lot of pessimism about QSR. Firstly, the share’s 10-day put / call open interest ratio of 1.90 on the International Securities Exchange (ISE), the Cboe Options Exchange (CBOE) and the NASDAQ OMX PHLX (PHLX). That ratio is over 74% of last year’s readings, suggesting that this bias for bearish betting is unusual.
And while short rates only account for 2.8% of QSR’s float, it would take nearly a week for the bears to cover their positions, which could lead to a possible short squeeze situation. Security could also benefit from a round of analyst upgrades and / or price target increases. Of the 17 in the coverage, seven still named fast food stock a “hold”, while the 12-month consensus price target of $ 66.92 represents a small premium of 2.9% at the close of trading on Friday.
This seems to be an excellent time to open up options for the next step of QSR as well. The security’s 27% Schaeffer Volatility Index (SVI) is in the lowest percentile of its annual range, meaning options traders are currently pricing in extremely low volatility expectations for the stock. We should also note that our recommended call option has a leverage ratio of 7.9 and will double if the underlying equity increases by 12.4%.
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