Shares of coal producer Peabody Energy Corporation (BTU) are up 227 percent over the past year amid a strong energy market. One trader sees a further year-end rally for the stock.
That’s based on the December 30 $32 call. With 23 days until expiration, 4,043 contracts traded compared to a prior open interest of 128, for a 32-fold rise in volume on the trade. The buyer of the calls paid $1.10 to make the bet.
The stock recently traded for just under $30, so shares would need to rise $2, or about 6.5 percent, for the option to move in-the-money.
Peabody shares have pulled back from their 52-week high just over $33 in recent sessions. The company has performed strongly in the past year, with a 98 percent jump in revenues. And even with the big jump in shares, the stock still trades under 4 times earnings.
Action to take: Shares are likely to resume their longer-term uptrend higher in the coming weeks. That could deliver a slightly higher share price for investors. That could bode well for buyers, who could see a low-double-digit gain in the coming weeks.
For traders, the call options could deliver high double-digit gains, particularly on a big jump in shares in the coming days. Traders should look to take quick profits before expiration.
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.