E-commerce stocks rose from lows in March.
Wayfair, Stitch Fix, Etsy and Chewy have seen three-digit increases since the market bottom four months ago. The surplus, the largest engine, has risen 2,058% since it bottomed out. These stocks were a hot commodity as home trading benefited from pandemic locks and quarantines.
Danielle Shay, director of options at Simpler Trading, said Overstock and his high-flying e-commerce colleagues had more advantages.
"The hype is exactly what makes it great, especially for short-term momentum traders like me," Shay told CNBC's "Trading Nation" on Monday. "My favorite part about them is that they are very interested in short sales and are very close to the highs that these short sellers have to cover."
Stitch Fix has the highest short share with 43% of its float. Wayfair and Chewy are second highest at 26% and 21%, respectively.
"The higher these things go, the more likely the short sellers will cover," said Shay.
To take advantage of a short print, Shay Delta buys 70 call options with a 30 day expiration. Delta indicates the extent to which an option reflects the movements of the underlying security. If a share rises by $ 1 at Delta 70, the call increases by 70 cents.
"With such movements, tickers with large percentage increases are the best tickers for trading on the options market. There are a lot of bonuses that you can sell if they return to the mean," said Shay.
Mark Newton, founder of Newton Advisors, does not oppose any of these emerging e-commerce companies given his moves. However, there is a name that could be prone to withdrawal.
"Stitch Fix … I don't like it as much as the others. Technically speaking, it has reached the previous highs that were reached both earlier this year and since last June and so after a run from about 11 to $ 30 is a pretty serious level for the stock, "Newton said in the same" Trading Nation "segment.
Stitch Fix hit 138% of its lows in March. However, it is only 1% higher for the year.
"I think technically it's not nearly as attractive as some of the others in the group," said Newton. "The lesson is that overbought is not a sale, but in this case Stitch Fix is not the same quality and caliber as some of the others and technically not as good as a stock that you can technically own."
Disclosure: Shay holds Chewy and Etsy.
Disclaimer of liability