Financial institution technology provider Fidelity National Information Services (FIS) has been cut in half over the past year. One trader sees the potential for a big rally in the coming months.
That’s based on the September $70 calls. With 70 days until expiration, 20,825 contracts traded compared to a prior open interest of 512, for a 41-fold rise in volume on the trade. The buyer of the calls paid $0.44 to make the bullish bet.
Shares recently traded for about $60, so they would need to rise $10, or about 17 percent, for the option to move in-the-money. The option is still well under the stock’s 52-week high of $105.16.
FIS has struggled with profitability over the past year. Revenues rose by just 0.5 percent.
However, the valuation in financial companies has led to shares trading near their book value and at just 9 times forward earnings. And the company is on track to sell off part of its business, which the market seems to like.
Action to take: Investors may like shares here, as they seem to be starting on an uptrend after dropping significantly over the past year. FIS share also yield about 3.9 percent at current prices.
For traders, the September calls are inexpensive, and could play out well over the coming months should shares continue to trend higher.
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.