Unusual Options Activity: The Charles Schwab Corporation (SCHW)

Brokerage firm The Charles Schwab Corporation (SCHW) has seen shares drop about 25 percent over the past year. One trader is betting on a long-term rebound.

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  • That’s based on the March 2024 $80 calls. With 163 days until expiration, 5,744 contracts traded compared to a prior open interest of 248, for a 23-fold rise in volume on the trade. The buyer of the calls paid $0.24 to make the bullish bet.

    Shares recently traded for about $53.50, so shares would need to rally nearly 50 percent for the option to move in-the-money. Schwab would also need to rally close to its 52-week high of $86.63, making this an aggressive trade.

    Such a move could be possible in the months ahead, given the oversold conditions in the market right now and the hit financial stocks in particular have taken.

    Earnings are down 28 percent over the past year amid an 8 percent drop in revenue. The brokerage is still profitable with a 33 percent profit margin.

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  • Action to take: Shares have been pushed down to 13 times forward earnings, and could benefit from a longer-term market rebound in the coming months. At current prices, shares also yield about 1.8 percent.

    For traders, the March calls have plenty of time for a big rally in shares to play out. And they’re inexpensive enough to potentially see triple-digit earnings, although shares may not likely move in-the-money in the coming months.


    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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