Shares of gambling and gaming company International Game Technology (IGT) have been trending down over the past few weeks as the threat of further economic lockdowns has risen. However, one trader sees the possibility for a rally higher.
That’s based on the January $27 calls. With 168 days until expiration, over 10,055 contracts traded against a prior open interest of 101, a 99.5-fold jump in volume. The buyer of the calls paid about $0.48.
Shares last traded around $18, so they’d need to rally nearly 50 percent in order to move in-the-money come January. Shares have a 52-week high of just under $26.50, so shares would also need to hit new highs in order to close in-the-money.
Even with the recent pullback, shares are up nearly 95 percent in the past year. Earnings are up nearly 25 percent as well, although the company isn’t yet back to profitability.
Action to take: Shares look interesting here, especially as company insiders own more than half the company. A rebound could be in order in the coming months as lockdown fears ease.
As shares don’t pay a dividend, investors may like the January calls. They have enough time for a big swing higher in shares to play out, and even if the option doesn’t move in-the-money, it’s inexpensive enough that it could still deliver triple-digit profits in the coming months.
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.