Single-family home leasing company Invitation Homes (INVH) is down 6% over the past year, amid a softening market for rents and stubbornly-high interest rates. One trader sees shares trending higher in the months ahead.
That’s based on the July $35 calls. With 175 days until expiration, 5,343 contracts traded compared to a prior open interest of 105, for a 51-fold rise in volume on the trade. The buyer of the calls paid $0.65 to make the bullish bet.
Invitation Homes shares recently traded for just under $31, so shares would need to rally by $4, or about 13%, for the option to move in-the-money. The strike price is just under INVH’s 52-week high of $37.80.
While revenues rose by 6% last year, overall earnings fell by 28% due to higher costs, from financing to home repairs. Shares currently trade at about 40 times earnings.
Action to take: Like many real-estate-related stocks, Invitation Homes has been held down by the recent rise in interest rates. Declining rates could allow shares to take off. Invitation recently hit a 52-week low and is looking to trend higher.
At current prices, investors can get a 3.7% dividend from shares, although that dividend payment is currently higher than earnings and may be subject to a future cut.
For traders, the July $35 calls are well positioned for a short-term bounce higher in the coming months. If a bounce happens soon, traders will want to take quick profits rather than hold the trade until expiration.
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.
