Unusual Options Activity: Lithium Americas (LAC)

Shares of commodity producer Lithium Americas (LAC) have been somewhat rangebound over the past few months, but have started to trend higher in recent days. One trader sees that trend continuing.

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  • That’s based on the September $25 calls. With 36 days until expiration, over 15,585 contracts traded against an open interest of 290 for a 54-fold rise in volume. The buyer of the calls paid about $0.45 to make the trade.

    Shares have recently risen to around $18, so they’d need to rally another $7, or over 38 prevent for this option to move in-the-money.

    That’s certainly possible given some of the moves that the company has seen in the past month. And a $25 strike price would still leave shares well under the $28.75 they traded at during their 52-week high.

    Action to take: Lithium stocks are likely to be a strong long-term play over the next few years as electric vehicle companies buy the metal for use in their products. Other electronics are finding use for lithium as well, making companies like Lithium Americas a likely strong long-term winner.

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  • In the short-term, a spike higher is certainly possible. With a trade with just over a month to go, a rally of nearly 40 percent seems unlikely, but not impossible. Traders may want to either find a strike date farther out, or look for a lower strike price. That can cost more and limit profits, but increase the probability of profits.

     

    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.