Unusual Options Activity: Cameco (CCJ)

Uranium producer Cameo (CCJ) has been a strong performer this year, with shares up over 75 percent. One trader sees further upside in the coming weeks.

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  • That’s based on the December 29 $50 calls. With 43 days until expiration, 31,631 contracts traded compared to a prior open interest of 130, for an 88-fold rise in volume on the trade. The buyer of the calls paid $0.63 to make the bullish bet.

    Shares recently traded for about $44, so they would need to rise $6, or nearly 15 percent, for the option to move in-the-money.

    Cameco is at a 52-week high right now, so the buyer of the call options is expecting the current uptrend to continue.

    Revenues are up 48 percent over the past year, and shares trade at 25 times earnings.

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  • While that’s a bit pricey for a commodity company, demand is rising for uranium and supplies are tight. Cameco is one of the largest companies for playing that uranium trend.

    Action to take: Prices are likely to continue to move higher. In a squeeze, shares could soar even more than they have over the past year. Cameco pays a variable dividend, with a current yield of 0.2 percent.

    For traders, the December $50 calls are aggressive, but inexpensive enough for high double-digit gains if the direction higher is correct.

    Traders may want to look to take a quick profit at a lower level, as shares are nearing overbought levels of relative strength at current prices.


    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.

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