Unusual Options Activity: Realty Income (O)

Real estate property owner and operator Realty Income (O), is down 20 percent over the past year as rising interest rates and concern over retail real estate have weighed on shares. One trader sees shares trending higher in the coming weeks.

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  • That’s based on the April $55 calls. With 56 days until expiration, 3,612 contracts traded compared to a prior open interest of 139, for a 26-fold rise in volume on the trade. The buyer of the calls paid $0.78.

    Realty Income shares recently traded for about $52.50, so the stock would need to rise about $2.50, or about 4.7 percent, for the option to move in-the-money. The strike price is well off the stock’s 52-week high of $67.05.

    Despite the drop in shares, Realty Income has fared well operationally. Revenues jumped 24 percent last year, and earnings roes by 6  percent. And Realty Income has a 22 percent profit margin.

    As a REIT, the company is structured to make regular cash payouts. Realty Income pays a monthly dividend, with an annual yield of 5.9 percent.

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  • Action to take: Long-term investors may like shares here or on any drop lower. With interest rates likely to decline later in the year, shares may make up for their underperformance in the past year. Plus, Realty Income has a history of slowly raising its dividend.

    For traders, the April $55 calls could see some high double-digit returns or better if shares trend higher in the coming weeks.


    Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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