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