Unusual Options Activity: Harley Davidson (HOG)

Motorcycle producer Harley Davidson (HOG) has been flat over the past year, gaining just 3% as the overall market is up 20%. One trader sees the stock trending higher in the coming weeks.

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  • That’s based on the May 17 $39 calls. With 27 days until expiration, 3,879 contracts traded compared to a prior open interest of 172, for a 23-fold rise in volume on the trade. The buyer of the calls paid $1.65 to make the bullish bet.

    Harley shares recently traded for about $38, so the stock would need to rise by $1, or nearly 3%, for the option to move in-the-money.

    Shares have pulled back from their 52-week high of $44.16 in recent weeks, correcting over 10%. In the short-term, shares look oversold.

    Harley trades for about 9 times forward earnings, and just under 1 times its price to sales, both signs that shares are a reasonable value.

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  • Action to take: Investors may see a short-term rebound in shares here, with the potential to rise 10% or so in the coming weeks. At current prices, Harley Davidson pays a 1.8% dividend.

    For traders, with shares looking oversold right now, the May $39 calls are well positioned for a rebound trade. The options can likely see mid-double-digit gains or better depending on the strength of the rebound.


    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.

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