Unusual Options Activity: Mr. Cooper Group (COOP)

Shares of mortgage finance company Mr. Cooper Group (COOP) have been in a steady uptrend for several months. Shares have pulled back slightly to start 2021, but one trader sees the uptrend continuing.

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  • That’s based on the April 2021 $35 calls. Over 5,500 contracts traded against an open interest of 268, for a 21-fold rise in volume. The option, expiring in 95 days, would move in-the-money if shares rise another $5, or 16 percent.

    The trader paid $1.30 for the options on average.

    Thanks to low interest rates and a wave of refinances, shares of the company have been a strong performer with a 128 percent gain in the past year. The company sports a solid 23 percent profit margin and earnings are up over 148 percent in 2020.

    The rising share price also puts the mortgage company about at book value. Given the rise in housing prices in the past year, this conservative measure is a sign that shares still have more room to run, even after their strong rally in recent months.

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  • Action to take: We like the stock’s steady upward trend. It’s easy to see shares of the stock continuing to rise, which makes these April option an inexpensive buy. Traders can expect to see high double-digit gains. Traders should look for overbought conditions in shares before taking profits.