Shares of building product company Masco Corporation (MAS) have been sliding in recent months. However, one trader sees the possibility of a rebound in the coming weeks.
That’s based on the July $60 calls. With 64 days until expiration, 6,004 contracts traded compared to a prior open interest of 151, for a 40-fold rise in volume on the trade. The buyer of the calls paid $0.77.
Shares recently traded around $53, so the stock would need to rise about 13 percent for the option to move in-the-money. Such a rally would still leave shares well under their 52-week high of $71.
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Despite shares being down about 17 percent over the past year, the company has seen earnings grow 148 percent and revenue rise 14 percent. And shares trade at just under 13 times forward earnings.
Action to take: Investors may like shares here, as the company’s products will continue to stay in high demand, no matter what the economy does. Plus, the company is a dividend growth stocks, with a starting yield for new buyers right now of about 2.1 percent.
For traders, the option is attractive, particularly if the stock market rebounds in the coming weeks, as that will likely push the option in-the-money. With a low price as well, traders can potentially see a high double-digit return on the trade.
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.