Unusual Option Activity: KBR (KBR)

Engineering firm KBR (KBR) lagged the overall stock market last year, rallying about 10 percent. One trader expects shares to make up for lost ground in the first half of 2024.

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  • That’s based on the June $57.50 calls. With 162 days until expiration, 5,041 contracts traded compared to a prior open interest of 115, for a 44-fold rise in volume on the trade. The buyer of the calls paid $2.50 to make the bullish bet.

    KBR shares recently traded for about $54, so they would need to rise about $3.50, or about 6.5 percent, for the option to move in-the-money. The strike price is well under KBR’s 52-week high of $65.87.

    The engineering and technology company has struggled a bit operationally. While revenues rose 9 percent over the last year, KBR still had a losing quarter.

    At present, however, shares are valued at 15 times forward earnings. And continued spending on infrastructure projects in the coming years should keep revenues strong.

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  • Action to take: KBR had a big selloff in November, and have been trending higher since. That trend looks likely to continue. At current prices, shares pay a 1 percent dividend.

    For traders, the June $57.50 calls could deliver mid-double-digit returns or better from a slight move higher in shares in the coming months. That looks like a reasonable long-term bet for traders.


    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.


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