Unusual Options Activity: PBF Energy (PBF)

Oil and gas refining company PBF Energy (PBF) has risen over 32 percent in the past two months. One trader sees a further rally in the weeks ahead.

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  • That’s based on the August $45 calls. With 45 days until expiration, 2,065 contracts traded compared to a prior open interest of 104, for a 20-fold rise in volume on the trade. The buyer of the calls paid $1.70 to make the bullish bet.

    Shares recently went for just over $41, so they would need to rise about $4, or just over 10 percent, for the option to move in-the-money. The strike price of the option is midway between the current price and the stock’s 52-week high of $49 per share.

    Even with the stock’s recent run, the refiner looks undervalued. Shares trade for less than 5 times earnings, and PBF trades right for book value. Plus thanks to strong refining margins right now, shares have a return of equity of 86 percent.

    Action to take: PBF Energy looks set to continue higher in the months ahead. At present, shares yield 1.4 percent, and the low payout ratio could lead to further dividend hikes in the future.

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  • For traders, the August calls are a reasonable short-term bet on the current uptrend. Traders can likely make mid-double-digit profits on the option.


    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.