Shares of oil and gas company Devon Energy (DVN) have been in a strong uptrend for the past year. one trader sees the potential for a move even higher in the first half of this year.
That’s based on the July $50 calls. With 188 days until expiration, 5,190 contracts traded compared to a prior open interest of 264, for a 20-fold rise in volume. The buyer of the option paid $4.68 to make the trade.
Shares have a 52-week high of $48.67 and are trading just slightly off of that around $46.60, so shares would only need to rise just over 7 percent for this option to move in-the-money.
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Even with shares up triple-digits over the past year, a strong energy market and earnings growth still leaves the stock at just over 8 times forward earnings.
Action to take: The energy market is likely to continue trending higher, which bodes well for investors and traders alike. Investors can get a current dividend yield of 0.9 percent, with the possibility of it increasing over time.
For traders, these calls have plenty of time to play out, and won’t take muck to move in-the-money. That can lead to mid-to-high double-digit returns in the months ahead, and traders can likely nab some quick profits well before this option expires.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.