Uranium producer Cameco (CCJ) just broke through to a new 52-week high. One trader is betting the rally will continue in the coming months.
That’s based on the September $37 calls. With 91 days until expiration, 20,433 contracts traded compared to a prior open interest of 151, for a 135-fold jump higher in trading volume. The buyer of the calls paid $0.85 to make the bullish bet.
Shares recently traded for about $31.50, so the stock would need to rise $5.50, or about 17 percent for the option to move in-the-money.
Given the stock’s 43 percent rally in the past year, and how commodity stocks can deliver triple-digit gains during a boom, such a move is likely.
Revenues are up 73 percent over the past year, and earnings are up 195 percent, thanks to rising uranium prices. That trend looks likely to continue. Plus, new nuclear power plant designs are on track to become operational in the coming years, although that’s a longer-term play.
Action to take: Shares are a momentum play at this point, as they’re a bit expensive on a conventional basis. But it’s possible there’s another 20-30 percent upside ahead for shares this year.
For traders, the September calls can potentially deliver mid-double-digit gains or better before they expire in the next three months.
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.