Unusual Options Activity: Coty Inc (COTY)

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  • Cosmetics firm Coty (COTY) has been a poor performer during the pandemic, but shares have started moving up in recent months. Now, after flatlining for a few weeks, one trader sees shares moving higher.

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  • That’s based on the March 2021 $7.50 call. With 43 days until expiration, over 10,200 contracts traded against an open interest of 247, for a 41-fold rise in volume. The trader paid about $0.53 for each contract.

    With shares at $6.60, the $7.50 trade will move in-the-money if shares move about 14 percent higher in the next few weeks. Shares briefly broke higher at the start of February, but have since trended back down to their trading range of the past few months following lackluster earnings.

    Action to take: With shares down nearly half since the pandemic broke, the potential end of lockdowns by the end of the year points to undervalued shares. Investors may like shares here, although the company isn’t a huge dividend payer.

    Overall, the March calls are an interesting trade, likely capable of creating mid-double-digit returns on a small pop higher in shares. Traders may like the trade, but should be nimble and look for a quick exit, given the range-bound nature of shares. Traders could also consider selling a put option here, or buying shares and writing a covered call, on the off chance the range-bound trend continues.

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