Unusual Options Activity: PayPal Holdings (PYPL)

Digital payment processor PayPal Holdings (PYPL) is up over 10 percent from its 52-week low just a few weeks ago. One trader sees further upside ahead before the end of the year.

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  • That’s based on the December 29 $60 calls. With 42 days until expiration, 9,803 contracts traded compared to a prior open interest of 241, for a 41-fold rise in volume on the trade. The buyer of the calls paid $1.80 to make the bullish bet.

    PayPal shares recently traded for over $58, so the stock would need to rise less than $2, or about 4 percent, for the option to move in-the-money. The strike price of the calls is still well under the 52-week high of $89.71.

    Shares are still down 35 percent over the past year as the stock has been hit hard. Earnings are off by 25 percent, but revenues have started to trend higher, up over 8 percent.

    Action to take: Despite the sharp rally off the lows, shares are poised for further gains in the months ahead. Currently, PayPal doesn’t pay a dividend, but investors could see low double-digit returns in the next few months.

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  • For traders, the December $60 calls are capable of moving in-the-money, and delivering mid-to-high double-digit returns.

    Shares are still far from being overbought after their recent rally. Traders should use any weakness in the next few days to build a position.


    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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