Medical Device Stock Delivered Christmas Treat to Bulls

Subscribers to Schaeffer's Players service more than doubled their money with our recommendation to buy Intuitive Surgical, Inc. (NASDAQ:ISRG) weekly 12/29 315-strike calls. Below, let's unpack how investors achieved this healthy profit in just two weeks.

At the time of our recommendation on Dec. 11, Intuitive Surgical stock was launching higher from an intersection of the 20-and 160-day moving averages. Following a large correction from its July peak, the stock had also bottomed just beneath its year-to-date breakeven in late October, and rallied more than 20% back above the $300 level. Short interest had also risen 34% since mid-August, setting ISRG up for a potential squeeze.

Options were affordably priced, too. The equity's Schaeffer's Volatility Index (SVI) of 89% ranked in the 13th percentile of its annual range, suggesting options traders were pricing in lower volatility expectations than usual.

Meanwhile, implied volatility (IV) on our recommended call strike was lower than both the 20- and 252-day historical volatilities. Plus, the equity's Schaeffer's Volatility Index (SVI) that ranked in the 17th percentile of its annual range, meaning options traders were pricing in low volatility expectations.

 

Another telltale sign was Intuitive Surgical stock's Schaeffer's Volatility Scorecard (SVS), which sat at 71 out of 100. A high SVS score indicates options are inexpensively priced in comparison with the probability of a substantial move in the shares, suggesting an opportune time to buy premium.

 

The shares started chopping higher immediately after our recommendation, and closed above long-term resistance at the $320 region in the following session. By the time our subscribers exited their positions on Dec. 22, the equity was trading at its highest level since late July, culminating in a nice 205% profit before the Christmas holiday.