Unusual Options Activity: Johnson Controls International (JCI)

Building product and systems manufacturer Johnson Controls International (JCI) has moved 22 percent higher in the past year. One trader sees further upside ahead for shares in the next three months.

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  • That’s based on the October $67.50 calls. With 129 days until expiration, 11,121 contracts traded compared to a prior open interest of 114, for a 98-fold jump in volume in the past year. The buyer of the calls paid $2.00 to make the bullish bet.

    Shares recently traded for about $63.50, so the stock would need to rise $4, or about 6.3 percent, for the option to move in-the-money. The strike price is close to the stock’s 52-week high of $69.60.

    Besides an increase in share price last year, Johnson Controls performed well operationally. Revenues rose by about 10 percent, and earnings exploded 1,100 percent higher.

    Action to take: Shares still look attractive at current prices or on a drop. JCI has a valuation of about 15 times forward earnings.

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  • Johnson Controls is also a dividend growth stock, with a starting yield here of about 2.3 percent. The payout ratio is a bit high, so future dividend increases will likely be small.

    For traders, the October $67.50 calls look attractive, as they can leverage a slight move higher in shares into a mid-double-digit return.

     

    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.

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