Drugstore chain Walgreens Boots Alliance (WBA) has been a poor performer, with shares cut in half over the past year. One trader sees shares bouncing higher into the end of the year.
That’s based on the December 20 $12.50 calls. With 59 days until expiration, 20,753 contracts traded compared to a prior open interest of 332, for a 63-fold rise in volume on the trade. The buyer of the calls paid $0.28 to make the bullish bet.
Walgreens shares recently traded for about $10.75, so shares would need to rally by about $1.75, or 16.3%, for the option to move in-the-money.
Shares hit a 52-week low of $8.22 in September, but have started to trend higher on a new CEO and plans to turn around the struggling chain.
It’s too soon to tell how a turnaround will play out. Walgreens lost over $8 billion last year, despite revenues inching higher by 6%.
Action to take: Shares are trending higher now, and momentum investors or special situation traders may like a position here.
Even after cutting its dividend payout, shares still pay a 9.4% yield at current prices.
For traders, the December 20 $12.50 calls are aggressive, but inexpensive enough to see triple-digit returns if the current uptrend continues to play out. Traders should look for signs of a slowdown in that uptrend to take profits and move on.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
