Shares of oil and gas exploration company
Range Resources Corporation (RRC) have been steadily rising over the past year. One trader sees that trend continuing through the rest of the year.
That’s based on the January 2023 $40 calls. With 297 days until expiration, 6,378 contracts traded compared to an open interest of 224, for a 28-fold jump in volume. The buyer of the calls paid $4.90 to get into the trade.
Shares of the company recently went for about $31.50, so they would need to rise about $8.50, or another 27 percent, for the option to move in-the-money. With shares up nearly 200 percent over the past year, that looks easily achievable for the options.
Besides the triple-digit price increase, earnings are up a staggering 2,221 percent over the past year. That growth rate may slow, but should still be profitable. Revenue is up a more modest 145 percent, and the company has an 11 percent profit margin, which can likely expand on further price increases.
Action to take: Shares don’t pay a dividend, so income-oriented investors may want to look elsewhere in the sector. But the share price should continue to rise from current levels.
For traders, the call options look like a fantastic swing trade, and can likely be cashed out at high-double or low-triple-digit profits on the next move higher in oil, which could occur months before the option expires.
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.