Unusual Options Activity: Capital One Financial (COF)

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  • Shares of finance company Capital One Financial (COF) have been in a steady uptrend for the past few months. One trader sees the potential for a continued rally higher.

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  • That’s based on the June 2021 $150 calls. With 76 days left to trade, and with shares near $130, shares would need to rise another 15 percent for the option to move in-the-money. Over 4,640 contracts traded, a 39-fold rise from the prior open interest of 119.

    The trader paid about $2.04 for the options.

    Shares are already up about 160 percent in the past year. With earnings growth over the past year more than double at 118 percent, and revenues up 26 percent, it’s clear the company has handled the pandemic well and is poised to continue to fare well as the economy recovers and card delinquency rates decline.

    Action to take: The June $150 calls are a little aggressive, but given their low price, a high-double digit return in the coming weeks looks likely. Less aggressive traders may want to select an option with a later strike date.

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  • Shares are also attractive on a valuation basis given the company’s strong growth in the past year. The company also raised its annual dividend payout to $1.60 from $1.00, so longer-term oriented income investors may like shares here.