Mattel Stock Extends Rally After Rejecting MGA Merger

There's still plenty of negative sentiment around the toy stock

When we last checked in with toy icon Mattel Inc (NASDAQ:MAT), the stock was reaping the benefits of a Hello Kitty partnership. Today, MAT is up 4.2% to trade at $11.26, after the company rejected MGA Entertainment's latest merger offer.

The bull gap from last week took Mattel stock back above its year-to-date breakeven level. Thanks to today, the shares have distanced themselves from this area, while at the same time toppling their 30-day moving average, a trendline that has kept a lid on breakouts since March. Year-over-year though, MAT is still staring at a 34% deficit.

There's plenty of sentiment to be unwound that could fuel a rally. Analystsremain on the sidelines, with seven out of nine in coverage rating the stock a tepid "hold." Plus, as alluded to last week, there is plenty of pessimism priced into the shares, making the security ripe for a short squeeze.

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 3.15, indicating that put have outpaced puts by a 3-to-1 ratio in the last two weeks. Echoing this, MAT's Schaeffer's put/call open interest ratio (SOIR) of 3.90 is two percentage points from an annual high, suggesting short-term options players have rarely been more put-heavy in the past 12 months.

Lastly, options are incredibly cheap right now. The equity's Schaeffer's Volatility Index (SVI) of 46% sits in the 22nd percentile of all other readings from the past year. With near-term option traders pricing in relatively low volatility expectations, now might be the time to bet on Mattel's next leg higher.