Chemical manufacturer Dow Inc. (DOW) is down over 50% in the past year. One trader is betting on a rebound by the end of 2025.
That’s based on the January 2026 $25 calls. The option has 282 days until expiration, and just saw a 31-fold rise in trading volume from 100 contracts to 3,067. The buyer of the calls paid $5.13 to make the bullish bet.
Dow recently traded for about $27, making the trade about $2.00 in-the-money. Shares recently fell with the rest of the market, hitting a new 52-week low of $26.33.
Chemical production typically follows the path of the physical economy. Over the past year, that’s been a bit flat, as seen with Dow’s 2% decline in revenues and lack of earnings growth.
However, shares trade at about 14 times earnings, a reasonable valuation now. Plus, the chemical industry has a high barrier to entry, which gives Dow some protection as an oligopoly company.
Action to take: With the recent breakdown to a new 52-week low, shares will continue to be volatile. But it’s also likely that shares have fallen too far, too fast, and are a reasonable value here.
Today’s investors can also get a hefty 9.9% dividend at current prices.
For traders, shares look oversold here. The January 2026 $25 calls are already in-the-money and have plenty of time to play out. They can likely see high double-digit gains. More aggressive calls, with a higher strike price or shorter strike date could see bigger returns.
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.
