Sell These 25 Stocks Now – Schaeffers Research (blog)

Despite June being known for low volatility, this month has not been without several events that have had the potential to jar the stock market. This week’s attention was centered on former FBI Director James Comey’s congressional testimony and the the U.K. election results. Looking ahead to next week, the Federal Reserve will hold its policy setting meeting, with fed futures currently pricing in a 99.6% chance of a June rate hike. And while we recently uncovered the best stocks to own during Fed weeks, it might be time to sell — or initiate options hedges — on retailers Bed Bath & Beyond Inc. (NASDAQ:BBBY) and Ralph Lauren Corp (NYSE:RL), with both retailers on the list of worst stocks to own since 2015, per data from Schaeffer’s Senior Quantitative Analyst Rocky White.

worst spx stocks fed weeks

BBBY Stock Hit a Seven-Year Low Earlier

Bed Bath & Beyond shares have lost an average 1.2% in Fed weeks, looking back to 2015, ending the month higher just 32% of the time. This would just be more of the same for BBBY stock, which is down 16.7% year-to-date to trade at $33.87 — fresh off today’s seven-year low of $33.63.

In BBBY’s options pits, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open calls over puts at a faster-than-usual clip. Specifically, the stock’s 10-day call/put volume ratio of 1.76 ranks in the 80th annual percentile.

It’s possible some of this activity is a result of short sellers hedging against any upside risk, considering a healthy 10% of BBBY’s float is sold short. Regardless, now appears to be an affordable time to buy premium on Bed Bath & Beyond. The stock’s Schaeffer’s Volatility Index (SVI) of 24% arrives in the 5th annual percentile, meaning low volatility expectations are being priced into near-term options.

Skepticism Ramps Up as RL Stock Sinks

Since 2015, Ralph Lauren shares have averaged a loss of 1.1% during Fed weeks, posting a positive monthly return less than one-third of the time. RL stock has been spiraling over the past 12 months, down more than 26%. The security was last seen trading at $68.78, after bottoming at a seven-year low of $66.06 on May 30.

Skepticism has been growing toward Ralph Lauren, too, with short interest up nearly 30% in the two most recent reporting periods. With short sellers in the driver’s seat, RL stock could be at risk of additional losses, should these bearish bettors continue to increase their exposure.

RL options traders have also been upping the bearish ante, per the stock’s 10-day ISE/CBOE/PHLX put/call volume ratio of 2.73, in the 87th annual percentile. Those buying short-term options are getting them on the cheap — from a volatility perspective — considering Ralph Lauren stock’s SVI of 24% sits lower than 91% of all comparable readings taken in the past year.

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