Unusual Options Activity: Coty (COTY)

Shares of cosmetics company Coty (COTY) have nearly tripled since November, on expectations that a reopening economy will be good for cosmetics sales. One trader sees the potential for a move even higher.

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  • That’s based on the November $12 calls. Expiring in 211 days, over 9,100 contacts traded, an 81-fold rise in volume from the prior open interest of 112. The buyer of the options paid about $0.72 to make the trade.

    With shares around $8.60, shares will need to rise about 40 percent higher in order for the option to close with any value at expiration.

    With shares up about 60 percent in the past year, shares are now performing slightly better than the S&P 500 over the same time. However, a drop in cosmetics sales led to a 16 percent drop in revenue in the past year and the company has yet to earn a profit in the past four quarters.

    Action to take: There’s certainly more room for upside if the company can improve its earnings and start posting profits. Even with a share price rally to $12, shares would be nowhere near their old all-time highs in the high $20 range.

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  • The option makes sense as a play on a reopening economy, and is low-priced enough to offer triple-digit returns with little downside. That makes for a potential big winner with low risk, and looks attractive here.


    Disclosure: The author of this article has no positions in the stock mentioned here, and has no intention of making a trade in the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.