Unusual Options Activity: Kinder Morgan (KMI)

Oil pipeline company Kinder Morgan (KMI) is trading flat over the past year. Declining energy prices and a lack of interest in the space have kept a lid on shares. One trader sees a jump higher in the month ahead.

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  • That’s based on the April 5th $18 call option. With 31 days until expiration, 8,153 contracts traded compared to a prior open interest of 141, for a 58-fold rise in volume on the trade. The buyer of the calls paid $0.16.

    Kinder Morgan shares recently traded for about $17.50, so the stock would need to rally about 3 percent for the calls to move in-the-money.

    The strike price is also near the stock’s 52-week high of $18.30.

    Shares have been trending strongly higher in the past few weeks, and stand a good chance of breaking $18.

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  • Energy prices are also entering a seasonally stronger period, which could also help boost shares.

    Action to take: Investors may like shares here, given the uptrend and seasonal strength at play. Kinder Morgan also pays a generous dividend with a 6.5 percent current yield.

    For traders, the April $18 calls could see the options deliver high-double-digit returns or even double, given their low cost and uptrend in shares.

    Traders may want to use any strong up day for shares to take a quick profit.


    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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