Unusual Options Activity: Barclays PLC (BCS)

Shares of British-based international bank Barclays PLC (BCS) have shed about 20 percent in the past year, as fears of a global recession have been on the rise. One trader sees the possibility for a rebound by next spring.

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  • That’s based on the March $9 calls. With 226 days until expiration, 4,023 contracts traded compared to a prior open interest of 100, for a 40-fold rise in volume on the trade. The buyer of the calls paid $0.53 to make the bet.

    Shares recently traded for about $8, so they’d need to rise $1 or just over 12 percent, for the options to move in-the-money. That would still be well under the bank’s 52-week high just over $12 per share.

    The bank has been well out of favor with markets lately. Shares are going for less than 5 times earnings, and the bank trades at just over one-third of its book value. While earnings have dropped by more than 40 percent in the past year, revenue has moved slightly higher.

    Action to take: The bank isn’t overly leveraged, and has an inexpensive valuation. It can likely thrive as the economy comes out of a recession. From current prices, it could soar as much as 50 percent higher to get back to its old highs. That makes it an interesting play, particularly with a 4.2 percent dividend yield now.

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  • For traders, the options are inexpensive, and could potentially deliver high-double-digit gains. As with any trade right now, start building a position, and look for any weak market days to add to it.

     

    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 of the companies mentioned in this article.