Networking technology company EchoStar Corporation (SATS) is up 24% over the past year, about in-line with the overall stock market. One trader sees shares rallying over the coming weeks.
That’s based on the October 18 $25 calls. With 38 days until expiration, 7,161 contracts traded compared to a prior open interest of 107, for a 67-fold rise in volume on the trade. The buyer of the calls paid $1.28 to make the bullish bet.
EchoStar shares recently traded for about $22.50, so the stock would need to rise by about $2.50, or about 11%, for the option to move in-the-money. Shares would also need to break to a new 52-week high past $23.05.
Shares are trending higher even as EchoStar has lost money over the past year. The company’s debt levels have also grown by over 130% over the same time, making this a risky momentum play.
Action to take: Investors looking to play momentum now may like shares here. Shares may continue to rally higher and see a low-double-digit return over the coming months.
For traders, the October $25 calls are a safer way to bet on a further rally from here. Especially with the overall market looking weak right now. A further move higher in shares could mean mid-double-digit return for the option with less capital to invest up front.
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 company mentioned in this article.
