Shares of consumer goods company Colgate-Palmolive Company (CL) have ended up trading flat over the past year. One trader sees the potential for a move higher in the coming months.
That’s based on the May $85 calls. With 142 days until expiration, 11,402 contracts traded hands, a 34-fold rise in volume from the prior open interest of 337 contracts. The buyer of the calls paid $2.88 to make the trade.
Shares last traded around $83, so it would take less than a 3 percent rally in shares for the option to move in-the-money. Shares have a 52-week high just over $86 per share.
Despite a lackluster performance in the past year, the company has a leading number of brands in the personal goods space. Earnings are slightly down over the past year, but revenues are up, and shares area trading at a valuation about in-line with the S&P 500 right now.
Action to take: Investors should consider shares, particularly on a market pullback. The company has a history of dividend growth, and at present yields 2.2 percent.
Investors may like the call option trade, as the stock market is likely poised to keep rallying in the next few weeks. The option can potentially offer mid-to-high double-digit yields in the months ahead.
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.