MAT: Let's Play With Mattel!
Let's review the T3/OP video with Jill and Scott for the fundamental and technical trade before getting into the options strategy:
Looking at the options, much to my surprise, MAT hit its lowest implied volatility level in over a year yesterday. This makes us want to be a buyer. Looking at the stock, it has been on a slow oscillating rally and has just bounced off of support. I think the stock testing $30 is entirely possible. With IV this low we can buy the 28 calls, the ATM's for about $0.65. From a cost and volatility perspective and the risk/reward profile, I think these calls are a steal if our premise that MAT is going up is correct. MAT options simply do not sit at 20% volatility for very long.
For those less sure the IV is so cheap a straddle would even be likely to win. That said, I lean bullish on the stock and like buying the January calls.
Trade: With MAT trading $27.99, buy to open MAT January 28 calls for $0.65.
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