Why Fastenal Call Options Look Attractive

Tailwind-inducing upgrades may be ahead

Back in October Fastenal Company (NASDAQ:FAST) stock gapped higher, and for months the shares traded in a tight sideways pattern. That was until earlier this month when the equity broke out to fresh highs, potentially foreshadowing an even stronger move higher -- which would only add to FAST's nearly 23% gain over the past year. It also helps that heavy call open interest at the just-above 40 strike is due to expire in the coming days, opening up the shares' upside potential even more.

Fastenal looks overdue for bullish analyst notes, too, which could bring additional buyers to the table. Amazingly, not one of the 11 analysts in coverage currently recommend FAST as a "buy." And while there's been a few months now of short covering, the short-interest ratio for the security stands at an elevated 7.9, suggesting there's potential for even more short sellers to hit the exits.

Lastly, volatility expectations look attractive for premium buyers, too, based on the Schaeffer's Volatility Index (SVI) of 24%, which ranks in the 14th annual percentile. What's more, our recommended call has a leverage ratio of 6.9, and will double in value on a 13.5% gain in the underlying stock.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this FAST commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.