Uranium producer Cameco (CCJ) is up over 25 percent in the past year, nearly double the return of the S&P 500. Shares are also near a 52-week high. One trader sees that trend continuing in the coming weeks.
That’s based on the October 20 $42 calls. With 35 days until expiration, 21,763 contracts traded compared to a prior open interest of 394, for a 55-fold rise in volume on the trade. The buyer of the calls paid $0.68 to make the bullish bet.
Cameco last traded for about $39, so shares would need to rise by $3, or just under 8 percent, for the option to move in-the-money. With the stock up over 20 percent since July and in a strong uptrend already, such a move looks possible.
Operationally, the company has struggled in the past year, with revenues down 14 percent.
However, the launch of a new nuclear power plant in the U.S. for the first time in decades and more on the drawing board could change the dynamic for the lithium market.
Action to take: In the last bull market for uranium, Cameco peaked close to $60 per share. Such a move from here would be a 50 percent rally higher.
For traders, the October calls are well priced for the potential returns, which could be in the triple-digits if the size of the current rally continues.
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.