Software company AppLovin (APP) will join the S&P 500 Index (SPX) before the market opens on September 22, replacing MarketAxess Holdings (MKTX). APP has been in rally mode since popping 11.5% on Sept. 8, the day of the announcement. The stock was last seen on track for its fourth-straight gain and earlier notched a fresh all-time high of $576.44, with support at the ascending 20-day moving average. The security could also extend its 538.8% year-over-year lead even further, thanks to a historically bullish signal that is coming into play.
In fact, the stock’s recent peak comes amid low implied volatility (IV), per its Schaeffer’s Volatility Index (SVI) of 53%, which ranks in the 12th percentile of its annual range. This has occurred six other times over the past five years, after which APP was higher one month later 77% of the time, averaging a 12.1% gain. From its current perch, a similar move would place the equity at another record peak.
Keep an eye on short sellers. Short interest increased by 13.7% in the two most recent reporting periods, and the 11.65 million shares sold short account for nearly 5% of the stock’s total available float.
While calls outnumber puts on an absolute basis, the rate of put buying has picked up lately. At the International Securities (ISE), Cboe Options (CBOE) and NASDAQ OMX PHLX (PHLX), APP’s 10-day put/call ratio of 0.98 sits in the 86th percentile of annual readings. Echoing this, short-term options traders have also been favoring puts of late, per the security’s Schaeffer’s put/call open interest ratio (SOIR) that sits in the 81st percentile of annual readings. An unwinding of these bearish bets could provide options-related tailwinds.
It’s also worth noting that AppLovin stock has tended to beat volatility expectations over the last 12 months. This is per its Schaeffer’s Volatility Scorecard (SVS) of 87 out of 100.