Unusual Options Activity: CSX Corp. (CSX)

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  • Bet on railroad firm getting back to 52-week high.

    The February 2020 $77.50 call options on CSX Corp. (CSX) saw 2,000 contracts trade, an 18-fold increase over the prior open interest of 114. With shares of the company around $72.21, the option will trade in-the-money if shares rise at least 7.3 percent between now and February.

    With a price of $2.53 per contract on average, the call buyer will need to see shares trade closer to $80 to make a profit come expiration.

    As the company’s 52-week high is right at $80 per share, the option looks dicey. CSX operates rail-based freight transportation services in the United States, primarily in the 23 states East of the Mississippi River.

    Action to take: Freight traffic has been slowing, both from a potentially slowing economy and the rise of a more digital economy, making a strong argument against a big rally from here. Shares look fairly valued at current prices, barring some kind of mega-merger with another railroad that would likely face severe antitrust scrutiny.

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  • We don’t see shares as likely to soar anytime soon, but should provide investors with decent returns over the long haul if bought at or under $73. Speculators may be better off finding a more volatile company in the transportation space to trade, given the high cost of call options on the space.