Silver mining firm First Majestic Silver (AG) is up 12% over the past 12 months, slightly edging out the overall stock market. One trader sees shares trending higher over the coming weeks.
That’s based on the May 2 $8 calls. With 31 days until expiration, 4,000 contracts traded compared to a prior open interest of 104, for a 38-fold rise in volume on the trade. The buyer of the calls paid $0.14 to make the bullish bet.
First Majestic shares recently traded for about $6.75, so shares would need to rally by $1.25, or 18.5%, for the option to move in-the-money. The strike price is right under First Majestic’s 52-week high of $8.44.
Silver prices have been volatile over the past year, but have generally been holding up well, although not quite as strongly as gold prices. Those higher prices have translated into a 25% increase in revenues for First Majestic, even though the company still isn’t profitable right now.
Action to take: Momentum investors may like shares here, to play the trend of silver prices heading higher. Investors can likely see double-digit gains over the coming months, although it will likely be volatile.
For traders, the May 2 $8 calls are aggressive with little time to play out, but could see mid-to-high double-digit returns given the low cost of the options. Traders should look to take a quick profit.
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.
