Unusual Options Activity: Credit Suisse (CS)

European bank Credit Suisse (CS) has seen its shares rise over the past few months. One trader sees an even bigger move ahead.

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  • That’s based on the March 2021 $14 calls. Over 4,300 contracts traded yesterday against a prior interest of 213, for a 20-fold gain in volume. The call buyer paid about $0.30 for the calls, which would move in-the-money if shares rose about 15 percent.

    The $14 strike price would put shares about where they traded before the March crash. Share shed over half their value, but have mostly recovered in the months since.

    Presently, shares of the bank trade at less than 8 times forward earnings and at just over half of book value. Book value tends to be a reasonable measure for the value of a bank, less any nonperforming loans. That low of a book value represents a solid margin of safety.

    Action to take: Investors may like shares here. Besides strong fundamentals, the bank pays a 2.5 percent dividend.

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  • Traders may want to take advantage of the continued uptrend in shares. The March call looks attractive, as a 15 percent rally in shares is easily achievable in that time frame. And given the low price, it’s an option with high-double to low-triple-digit return potential.