Wayfair Stock Bounces Back from Walkout Drama

Wayfair stock may be ripe for a short squeeze

As criticism mounts over the state of U.S. migrant camps, furniture firm Wayfair Inc (NASDAQ:W) has found itself in the middle of it. Today, hundreds of employees are planning a walkout after the retailer allegedly sold $200,000 in bedroom furniture to a Texas detention facility for migrant children.

A Twitter account called "Wayfairwalkout" was created earlier this month, and includes support from national political figureheads Alexandria Ocasio-Cortez and Elizabeth Warren. While Wayfair stock dropped 5.3% in response to the news yesterday, it is up 0.7% to trade at $145.52 today. The shares boast a 61% lead in 2019, but since a March 21 high of $173.47, have traded in a tight range between the $140 and $165 levels.

Should Wayfair stock extend today's positive price action, continued short covering could create near-term tailwinds. Short interest already fell 4.6% in the two most recent reporting periods to 12.68 million shares. Yet this still accounts for a whopping 21% of W's total available float, and 7.6 times the average daily trading volume.

Traders betting on the next leg higher should consider short-term options, which can be purchased for a bargain at the moment. The equity's Schaeffer's Volatility Index (SVI) of 48% is in the 15th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations for W shares.

Plus, investors will be pleased to know that W sports a Schaeffer's Volatility Scorecard (SVS) of 92 out of a possible 100. This indicates the furniture stock has handily exceeded options traders' volatility expectations in the past year -- a boon to would-be premium buyers.