Unusual Stock Options Volume for Self-Storage Facilities Reflects Shifts in Underlying Demographic and Economic Factors
Despite the pressures associated with the COVID-19 disruption impacting the economy, self-storage facilities Global Self Storage Inc (US:SELF) and Extra Space Storage, Inc. (US:EXR) continue to post relatively strong performances so far this year. Further, bullishly aligned unusual stock options volume suggests that traders recognize their upside potential.
Unusual options activity (UOA) is generally considered a strong signal for a directional price movement. One metric of unusual options activity is the total volume of put or call options divided by the open interest in the same option type. If the total volume of call or put options exceeds the current open interest, then that is considered unusual and indicates a strong directional signal.
First, following the close of the March 13 session, call volume for SELF stock options reached 213 contracts against an open interest reading of 75. On average, SELF’s call volume typically hits three contracts. What’s more, put volume on the Monday session came out to zero contracts against open interest of 73. The average put volume is usually one contract.
Second, on the same day, call volume for EXR stock options reached 3,548 contracts against open interest of 3,034. On average, calls hit 39 contracts. Looking to the other end of the equation, put volume came out to 317 contracts versus open interest of 1,539. The average put volume for EXR typically pings at 33 contracts.
According to a Realtor Magazine article published in February 2022, “Gen Xers (54%) and baby boomers (51%) are the most likely to use self-storage. Millennials are also showing increased interest at 40%.” Further, the publication identified downsizing as the main reason Americans rent a storage unit. From there, moving or needing more storage space at home represented the next major catalysts.
Both firms are real estate investment trusts. REITs offer investors the benefits of liquidity, diversification, and passive income via high dividends. And the downsides? Those include taxes, fees, and market volatility due to interest rate movements or trends in the real estate market.
Fundamentally, both SELF stock and EXR stock may benefit from demographic trends. A November 2020 Pew Research Center report noted that the pace of baby boomer retirements accelerated from 2019. Further, it targeted job losses associated with the COVID-19 recession as a contributor to boomer retirements.
So, if the Federal Reserve’s monetary policy continues to spark layoffs, the rate of retirement in the underlying age cohort may rise throughout this year, possibly catalyzing upside for SELF stock and EXR stock.
As well, economic shifts could also bolster self-storage demand. According to a recent Reuters report, sticky residential rental prices offer little relief for U.S. consumers. Under this pressured circumstance, younger-than-boomer cohorts may be forced to downsize, thus potentially driving demand for storage units, a dynamic that aligns with Realtor Magazine’s key observations.
Still, not all self-storage facilities as an investment category offer equal performance. On a trailing-year basis, EXR stock is down about 18%. In contrast, SELF stock is only about 3% below parity during the same period.
This article originally appeared on Fintel
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