Oil and gas exploration and production giant BP (BP) has traded down 24% over the past year, as energy prices have remained lackluster. One trader sees shares trending higher by the end of the month.
That’s based on the May 30 $31 calls. With 17 days until expiration, 27,223 contracts traded compared to a prior open interest of 237, for a 115-fold rise in volume on the trade. The buyer of the calls paid $0.38 to make the bullish bet.
BP shares recently traded right around $30, so shares would need to rally by $1, or about 3.3%. BP shares hit a 52-week low of $25.22 in April, and have been trending higher.
However, BP remains well under the $35 range they traded at before the tariff and trade war kicked off.
Operationally, the challenging energy market has hit BP. Revenues are down by 4%, and earnings growth has slid by a full 70%.
Action to take: BP now trades at 0.4 times its price to sales, and at 9 times forward earnings. Besides being cheap, shares pay a hefty 6.7% dividend. Given the current fear in the oil market, long-term investors may want to buy and reinvest the dividends.
For traders, the May 30 $31 calls plays to the current short-term trend higher in BP shares. The options are inexpensive enough to see high double-digit returns in the coming days. With so little time left on the trade, 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.