Are you searching for a playable bottom? Then look no further than Russian search engine Yandex NV (YNDX) — the once-hot momentum stock that has been driven into the ground for nearly two years.
On Monday, Yandex stock finally caught a break.
YNDX, Russia’s largest internet search provider, but one that’s been increasingly under pressure from Google Inc (GOOG, GOOGL) caught a break from Russian regulators Monday and subsequently from traders who reacted favorably to the news by bidding shares of Yandex stock up by about 7%.
Russian officials ruled Google violated competition rules by using its market influence and pushing the bundling of its apps and services on Android mobile devices while allegedly excluding alternative product choices from competition like YNDX.
Also catching our eye: Typically quiet options activity in Yandex stock saw abnormally heavy trading on Monday, which looks like bullish confirmation. Volume in Yandex options swelled to roughly 20,000 contracts, versus a normal day where activity amounts to a couple hundred calls and puts trading.
Of the contract deluge in YNDX, calls easily outstripped put activity by more than 10-to-1. The Yandex Oct $14 call was the most active option. (And with YNDX around $12, that supports the idea of further upside in Yandex stock.)
Yandex Weekly Chart
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Unlike the suspect V-bottom that’s more than a bit popular in U.S.-based company’s stock tickers, Yandex has had to endure an actual bear market. In this case, for the past 21 months or so, YNDX stock has been trading ever lower, shedding nearly 80% of its stock price in the process.
The length and price beating that Yandex has endured means there’s ever likelier support for higher prices, as all trends do eventually come to an end.
Secondly, with Monday’s bid in Yandex stock, the weekly chart has completed a two-week pullback pattern from the pivot and bear-market low in shares of YNDX. The weekly candle formation in Yandex also has the secondary support of its weekly stochastics indicator, which is pointed higher and far from being overbought.
Yandex Collar Strategy
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By using a collar, the trader can greatly reduce unwanted volatility risk. In fact, with this specific Yandex collar, there’s a modest advantage for the trader at this price.
By selling the $13 call to finance the protective $11 put, a credit of 10 cents is received. Typically, we’d expect to trade this kind of collar for “even money” or “no cost” as the strikes are essentially distributed evenly around Yandex stock.
Additionally, there’s also the advantage of a limited risk profile in the collar. With a standalone long stock position, you have to rely much more on “the bottom” in keeping potentially larger losses from occurring.
Some bulls may be less pleased that the Yandex collar’s upside is initially capped at the $13 strike. But should shares rally, the collar, at expiration, actually delivers a nice size and slightly stronger profit of $1.05, or an 8.7% return over the course of one month.
And if YNDX were to rally even harder? The collar in Yandex can always be rolled or adjusted to increase the potential gains.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual.
