Unusual Options Activity: Papa John’s International (PZZA)

Pizza chain Papa John’s International (PZZA) is down 20 percent over the past year, and shares trade near their 52-week low. However, one trader sees the possibility for a sizeable jump higher in the coming weeks.

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  • That’s based on the December 15 $72.50 calls. With 16 days until expiration, 3,512 contracts traded compared to a prior open interest of 105, for a 33-fold rise in volume on the options trade. The buyer of the calls paid $0.45 to make the bullish bet.

    Papa John’s shares recently went for just over $67, so they’d have to rise about 11 percent in just over 2 weeks for the option to move in-the-money.

    The strike price is still well under the stock’s 52-week high of $97.78.

    Revenues are flat over the past year, but earnings are up over 90 percent, as Papa John’s has focused on keeping costs down. Consumer demand has shifted somewhat away from pizzas and towards lower-end, dine-in restaurants in 2023 as consumers have spent relatively more on experiences.

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  • Action to take: Shares could move higher than the rest of the market in a year-end holiday rally scenario. At current prices, Papa John’s yields 2.7 percent.

    For traders, the December 15 calls are aggressive, but a quick move higher in shares could lead to mid-double-digit gains. Traders should take quick profits, as it’s unlikely there will be a catalyst to move shares in-the-money soon.


    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.

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