Unusual Options Activity: The TJX Companies (TJX)

Shares of clothing retailing chain The TJX Companies (TJX) have been somewhat range-bound this year, but have been rallying to the higher end of their range in the past few weeks. One trader sees the chance for a further rally past the holiday season.

  • Special: This Company’s Share Price has Increased 1650% Since 2016
  • That’s based on the January $82.50 calls. With 71 days until expiration, 7,542 contracts traded against a prior open interest of 233, for a 34-fold rise in volume. The buyer of the calls paid $0.39 to make the trade.

    With shares just under $70, shares would need to rally about 18 percent for the trade to move in-the-money before expiration. That would require shares breaking out of their current range, and hitting a new 52-week high past the previous high of $76.

    Shares could potentially break to new highs in the coming weeks, especially if apparel spending comes in higher than expected this holiday season.

    Action to take: Shares are fairly valued at around 20 times forward earnings, and revenue growth has been robust, so a blowout holiday season could lead to a jump higher in shares. Buyers at current prices can likely lock in a dividend yield near 1.5 percent.

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  • For traders, the January calls should expire well after traders get a sense of how the holiday season is unfolding. They’re priced low enough to offer triple-digit returns, with a low cost in case shares don’t break to new highs.

     

    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.