Unusual Options Activity for Harley-Davidson (HOG) Points to a Contested Arena

From a bird’s eye view, motorcycle legend Harley-Davidson (HOG) doesn’t particularly resonate as a bullish opportunity. Let’s face reality – although there are few things in life more astonishingly awesome (and intimidating) than a Harley rumbling down the highway at full throttle, society has, to put it politely, changed. And that leaves those pondering about the forward trajectory of HOG stock in a predicament.

Adding to those concerns, unusual stock options volume – a matter which we’ll discuss in greater detail below – points to a relatively split sentiment at time of writing. Frankly, it’s not the most bizarre development. For instance, age cohorts do not represent rolling figures, meaning that the oldest millennials will soon reach a point where midlife crises become a thing. Cynically, this framework may help HOG stock.

On the other hand, industry outlets report declining sales overall. One major reason is that the sector tends to almost exclusively target baby boomers, with relatively little effort expended toward younger potential customers. As well, social trends, such as the gravitation toward electric vehicles, don’t natively support HOG stock.

However, as Barchart contributor Will Ashworth mentioned, Harley announced in December 2021 that it would spin off LiveWire, the company’s electric-bike division. “LiveWire plans to redefine motorcycling as the industry-leading, all-electric motorcycle company, with a focus on the urban market and beyond,” Marketwatch reported in the company’s December press release.

Now, the beauty of owning HOG stock is that per Ashworth’s report, Harley still owns 74% of LiveWire. Therefore, investors can gain exposure to a potentially burgeoning market while still banking on an American icon. Further, if the rise of e-bikes in general is any indication, two-wheeled electric mobility could enjoy serious relevance.

Still, not everyone is convinced, as trading dynamics in the derivatives market imply a significant struggle for control.

HOG Stock Becomes a Subject of Unusual Options Activity

Following the close of the Jan. 5 session, HOG stock represented one of the highlights in Barchart.com’s screener for unusual stock options volume. This metric shows the difference between the current volume and the average volume over the past month. Traders usually leverage this data to determine which stocks may be due for big moves ahead.

Specifically, HOG’s volume level reached 12,782 contracts against an open interest reading of 72,731. Call volume hit 6,245 contracts versus put volume of 6,537. Further, the delta between the trailing-month average total volume versus the prior day’s session volume came out to 226.99%. The implied volatility (IV) rank hit 31.38%, which indicates the (at the money) average IV relative to the highest and lowest values over the trailing one-year period.

To summarize, IV signifies the expected volatility of a stock over the life of an option. As certain influencing factors for the underlying investment changes, the IV will likely change as well. Further, as demand for an option increases, so too will its IV.

The IV low for HOG stock was 33.47% on Dec. 2, 2022. Several months earlier on April 26, HOG hit its IV high of 62.95%. Prospective investors should note that per Barchart.com’s technical analysis gauge, HOG ranks as an average 40% buy. HOG’s short and medium-term indicators feature a relatively split sentiment, while its long-term indicator points to a decisively optimistic outlook. For context, in the trailing year, HOG returned nearly 9%.

At time of writing, most covering analysts maintain a balanced view regarding HOG stock. Three months ago, Wall Street experts rated shares as a “moderate buy,” breaking down as two strong buys and five holds. In the current month, the consensus slipped to “hold.” Now, two additional analysts weighed in, one with a hold rating while the other pegged HOG as a moderate sell.

Also, investors should note that HOG stock currently features a 60-month beta of 1.36, which is somewhat more volatile than the benchmark equities index. Thus, prospective buyers should exercise caution.

Social Normalization Trends Might Help HOG Stock

As stated above, HOG stock gained almost 9% in the trailing year. During the same period, the benchmark S&P 500 index declined nearly 19%. No matter what, that’s a remarkable performance, reflecting a possible underappreciated bullish narrative.

Also, in Harley’s latest earnings report for the third quarter, Zacks Equity Research stated that it delivered adjusted “quarterly earnings of $1.78 per share, beating the Zacks Consensus Estimate of $1.45 per share. This compares to earnings of $1.05 per share a year ago.”

In addition, Harley “posted revenues of $1.44 billion for the quarter ended September 2022, surpassing the Zacks Consensus Estimate by 8.26%. This compares to year-ago revenues of $1.16 billion.” At a time when so many companies posted dour quarterly performances, a motorcycle company delivered the goods.

Fundamentally, it’s possible that social normalization trends may be undergirding some of the enthusiasm for HOG stock. For example, the potential return to the nine-to-five grind for formerly remote workers could spark sentiments similar to a midlife crisis. If anything, hitting the open road with a hog may be one of the last real avenues of freedom.

Still, it’s fair to point out that this narrative is a risky one. With a possible recession on the horizon, the consumer discretionary sector presents many concerns. Ultimately, though, HOG stock may be worth moderate speculation based on its market and financial performances.

• Stocks Retreat on U.S. Labor Market Strength and a Hawkish Fed
• Slowdown in Auto Sales Could Weigh on Chipmakers
• U.S. Labor Market Strength and Hawkish Fed Comments Hammer Stocks
• Unusual Options Volume for Coty (COTY) Screams a Long-Term Opportunity