Retail chain TJX Companies (TJX) is up nearly 50 percent over the past year, although the stock has come down in the past few weeks. One trader sees a strong rebound in the coming weeks.
That’s based on the October $96 calls. With 24 days left until expiration, 20,393 contracts traded compared to a prior open interest of 235, for an 87-fold rise in volume on the trade. The buyer of the calls paid $0.12 to make the bullish bet.
Shares recently traded for about $89, so they would need to rise $7, or about 8 percent, for the option to move in-the-money. That would also mean shares moving past their old all-time high of $93.78.
The discount retailer has held up well amid a slowdown in consumer spending. Revenues are up 8 percent over the past year, and earnings have jumped 22 percent.
Shares look a bit pricey compared to the S&P 500 at 24 times forward earnings, but if TJX can continue to grow and gain market share in a weak economy, the stock can trend higher in time.
Action to take: Investors may like shares here following the recent drop. The stock looks oversold in the short-term and could be ready to jump higher. At current prices, shares also yield about 1.5 percent.
For traders, the October calls are aggressive, as they only have a few weeks to play out. But they should move in the right direction, and given their low cost, could see triple-digit gains. Traders should look for a quick profit given today’s volatile markets.
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.