Hotel operator Hilton Worldwide Holdings (HLT) is up over 30% in the past year, far outpacing the overall stock market. One trader sees shares trending even higher into the summer.
That’s based on the June $250 calls. With 131 days until expiration, 28,550 contracts traded compared to a prior open interest of 186, for a massive 153-fold rise in volume on the trade. The buyer of the calls paid $30.50 to make the bullish bet.
Hilton shares recently traded for about $270, meaning the call options are already about $20 in-the-money. Hilton just broke to a new 52-week high following earnings, and shares remain in a strong uptrend.
That’s in spite of a modest 6% increase in revenues over the past year, and as overall earnings growth declined by 10%. Plus, at current prices, Hilton trades at 55 times earnings and over 35 times forward earnings.
Action to take: Momentum investors may like shares here, as the stock continues to break higher. However, value investors may want to look elsewhere in the hotel and hospitality sector. At current prices Hilton pays a 0.2% dividend.
For traders, the June $250 calls could see double-digit returns from here. The options are expensive, since they’re already $20 in-the-money. More aggressive traders may want to look at a higher strike price for the June calls, such as the $290 calls, which trade for a more reasonable $7.40.
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.
