Unusual Options Activity: Capital One Financial (COF)

Financial services company Capital One Financial (COF) is down about 10 percent in the past year, as rising interest rates have weighed on the financial services provider. One trader sees a rally ahead for shares in the coming weeks.

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  • That’s based on the October $120 calls. With 56 days until expiration, 15,475 contracts traded compared to a prior open interest of 361, for a 43-fold rise in volume on the trade. The buyer of the calls paid $0.50 to make the bullish bet.

    Shares recently went for just over $100, so they would need to rise $20, or about 20 percent, for the options to move in-the-money.

    With a 52-week high of $123, set back in February, such a move is a bit aggressive, even for an options trade.

    Capital One shares trade at 8 times earnings, and at about a 25 percent discount to their book value.

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  • Shares have moved lower sharply with the bank failures earlier this year, and reflect some of the uncertainty in credit markets today.

    Action to take: Shares are arguably oversold in the short-term, and likely to move higher. At current prices, shares pay a 2.3 percent dividend yield.

    For traders, the October calls reflect how shares are oversold and ready to move higher in the coming weeks. They could see high double-digit returns in the next two 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.

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