Energy prices have been rebounding in recent weeks, and one trader sees a possibility to play that trade with Devon Energy (DVN).
That’s based on the December $30 calls. With 113 days until expiration, over 9,360 contracts traded against a prior open interest of 145, for a 65-fold rise in volume. The buyer of the calls paid about $2.39 to make the trade.
Shares recently traded near $28.50, so they would need to rise less than 10 percent to move in-the-money. Given the stock’s 52-week high of $32, it’s certainly possible that this trade could move in-the-money, although shares would need to break higher to make a profit at expiration.
- My #1 EV Stock (NOT Tesla)
I believe this little-known company will be the next EV giant.
Its car is faster than Ferrari's F8, McLaren's 720S and Porsche's 911 Turbo. Yet it's 100% electric.
And while it's a marvel of American engineering...The CEO wants it to be an everyman's car... and plans to ship out 1 million per year.
Already, it's set to grow faster than Tesla, Amazon and Facebook... COMBINED. Sales could DOUBLE to $5.5 billion in 2023... then almost double again to $9.9 billion a year after that.
Simply put, this company could be on the verge of a HUGE run.
Action to take: The oil and gas exploration company currently pays about a 1.7 percent dividend yield. That’s a decent start for investors looking for income, although many stocks in the energy space pay more and offer more diversification.
The real question is how far shares can rally. If a big move occurs in the months ahead, these December calls should provide high double to low-triple-digit profits.
The trade is likely a reasonable one, but historically energy prices to come down a bit going into the late autumn and winter months, so traders may want to book profits on this trade within a few weeks and look for a stronger trade elsewhere to close out the year.
Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.