Unusual Options Activity: Live Nation Entertainment (LYV)

Shares of ticket selling company Live Nation Entertainment (LYV) spiked higher following the vaccine rollout, pulled back, and have now moved back to their old highs. One trader sees shares breaking through to new highs in the second half of the year.

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  • That’s based on the January 2022 $95 calls. With over six months until expiration, 5,326 contracts traded against a prior open interest of 161, for a 33-fold rise in volume.

    The buyer of the option paid about $8.60 to make the trade. With shares just over $90, they’d need a modest $5 rise to move in-the-money.

    As a pandemic rebound play, share are up heavily, nearly 84 percent over the past year.

    That’s in spite of massive financial losses, which traders expect to rebound as event venues have already started reopening. Over the last year, revenue collapsed nearly 80 percent, earnings were negative, and the company currently sports a negative 235 percent profit margin.

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  • Action to take: While the valuation currently looks stretched, rising revenue and earnings from the economic reopening are likely to cause shares to eventually break higher to all-time highs.

    With a strike date far out into next year, traders can potentially see high-double-digit or even low triple-digit returns with this option. Given the time involved, traders may want to look for a down day in shares to buy the call option more cheaply when entering the trade.

     

    Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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