Marine shipping company Nordic American Tankers Limited (NAT) is up over 65 percent in the past year. One trader sees the potential for a pullback in the weeks ahead.
That’s based on the September 15 $4.50 puts. With 31 days until expiration, 9,620 contracts traded compared to a prior open interest of 224, for a 43-fold rise in volume on the trade. The buyer of the puts paid $0.60 to make the bearish bet.
Shares recently traded just over $4, making this trade slightly in-the-money already. While the tanker has been trending higher overall in the past year, shares have been prone to large pullbacks.
Nordic has growth earnings over 460 percent in the past year. However, the shipping company has yet to turn a profit. Plus, shares may see some pressure amid a slowdown in global trade.
Action to take: Investors may like shares on a pullback. Given the company’s limited growth prospects, they pay a high dividend yield over 13 percent at today’s prices. That yield will be variable with earnings and will fluctuate, but could be a big cash cow for years to come.
For traders, the September puts play well to the high probability of a short-term pullback in Nordic shares. The puts are inexpensive enough to see high double-digit gains or more in the coming weeks.