Shares of oil and gas equipment and services company Baker Hughes (BKR) have surged 30 percent higher in the past month. One trader sees that trend continuing over the summer.
That’s based on the October $29 calls. With 133 days until expiration, over 6,180 contracts traded against a prior open interest of 104, for a 59-fold jump in volume. The buyer of the calls paid about $1.45 to make the trade.
Shares have recently broken through to new highs, exceeding the prior high set a few months back. Shares are also trending up without getting into overbought technical territory, suggesting shares could head higher.
Operationally, revenue is down over the past year, and earnings are still negative, coming off of oil’s weak performance in 2020. However, trends are improving substantially.
We’re also entering the summer driving season in the US, when road trips and vacations add a seasonal element to oil demand. That could also bode well for shares before this option expires.
Action to take: This trade looks like a reasonable way to bet on higher energy prices with a low downside. A few of these options trades could offset the pain at the pump from rising oil prices. Traders should look to close out the trade if shares move in-the-money.
Disclosure: The author of this article has no position in the stock mentioned here, but may make a trade in this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.