Unusual Options Activity: Hilton Worldwide Holdings (HLT)

Shares of hotel chain Hilton Worldwide Holdings (HLT) have been gradually rising over the past year. One trader is betting that the steady move higher will continue over the next year.

  • Special: This Company’s Share Price has Increased 1650% Since 2016
  • That’s based on the January 2023 $150 calls. With 428 days until expiation, 8,790 contracts traded against a prior open interest of 155, marking a 57-fold jump in volume. The buyer of the calls paid $16.15 for the trade.

    With shares around $142, the option will move in-the-money on less than a 6 percent rally in shares. With the stock up 38 percent in the past year, beating the S&P 500 by about 5 points, it’s likely that a further rally will send the option higher. Shares are coming just slightly off their 52-week high of $154.

    The company is starting to show a profit again following the pandemic. Shares trade at 1,100 times current earnings, but a far more reasonable 33 times forward earnings on expected continued growth.

    Action to take: The company is a well-known brand likely to continue benefitting from the recovery in vacation travel. Investors can do well with a continued move higher in shares, and avoid the complexity of an options trade, although the stock does not pay a dividend at present.

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  • Options traders looking for a more rapid return may look elsewhere. For those who like long-dated plays, this looks like an attractive one based on the cost and potential returns, which could hit triple-digits in the year ahead on a move higher in shares.

     

    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.