1 2This high-margin business model spells consistent profits.While there are plenty of business models out there for how to operate a company, a great one for shareholders is in the royalty space. Simply put, a royalty company owns a patent or provides capital to another company. When that other company makes a product, a tiny amount of sales go to the royalty company. This provides a number of advantages for the royalty company. They have no production risk, no sales, and can operate with very few employees. That means these companies can produce higher profit margins, and reward sh...

Traders bet on continued rally.The February $200 call option onVisa (V) saw a 10-fold surge in volume, going from 140 open contracts to seeing over 1,400 trade hands. The bet, expiring in 57 days, is that shares can move up to $200 from their current price near $188. The $12 move in shares is about a 6.4 percent rally. The option buyer paid $1.02, or $102 per contract, making for an inexpensive way to bet on the current rally in shares to continue. Visa shares have had a fantastic surge this year with a 53 percent rally.Action to take: As part of a payment system oligopoly with a fant...

Traders bet on continued rally.The January 10th, 2020 $57 call options onMicron (MU) saw a 37-fold rise in volume, going from 139 open contracts to over 5,000. With only 16 days until the option expires, shares will need to rise 2.8 percent in order to move in-the-money. And costing around $0.90, or $90 per contract, shares may need to move closer to $58 before the call buyer profits. Shares of Micron are already trading near a 52-week high and have surged over $10 per share in the past month thanks to the market rally and strong earnings.Action to take: Shares of Micron are trading w...

Traders bet on drop after massive rally.16 months ago,Tesla Motors (TSLA) CEO Elon Musk tweeted about taking the company private at $420 per share. When that deal didn’t go through, shares got hammered—but now shares are closing in on that price after a massive rally. Some traders think this is a sign that the rally is about to end, judging by the activity in Tesla Motors put options. The December 27th $415 puts saw over 4,900 contracts trade, a 13-fold rise in volume. The bet, with shares around $420, implies a small pullback by the end of the week.Action to take: Shares have had a f...

Traders bet on rally to continue.January 31st, 2020 $40.50 call options onAT&T (T) saw a 25-fold rise in open interest, going from 205 contracts to over 5,000 trade hands. With 39 days until expiration, the bet is that shares will rally another $1.50, or 3.8 percent from their current price around $39. The buyer paid around $0.32, or $32 per option contract, and would need to see shares closer to $41 to make a profit at expiration. AT&T, the telecom giant, has diversified in recent years with acquisitions that have expanded it from delivering content to creating it as well, mo...

Traders bet on massive rally in the first half of 2020.July 2020 $65 call options onIntel (INTC) saw a 19-fold increase in volume. Going from 213 to over 3,900 contracts, the bet is that shares will continue their rally. The recent price for shares around $57.50 relative to the option strike price indicates a 13 percent move higher in the next 210 days before expiration. The traders paid around $1.55, or $155 per contract. Any move closer to the strike price in the next few weeks could lead the option to surge well before the time premium runs out, otherwise the trader will need share...

Traders bet on company heading higher.The February 2020 $135 call options onEli Lilly and Company (LLY) saw a 20-fold rise in volume, going from 164 open contracts to over 3,380 trade hands. With 64 days to go until expiration and with shares trading around $128.50, the option will move in-the-money with a 5 percent rally in shares. Given the option price around $1.95, the option buyer stands to profit at expiration if shares hit $137 or higher. The option trade comes as the company reports earnings, with an upbeat note on sales and its profit outlook for 2020, further bolstering the ...

Rise in put-buying suggests drop in shares.Multiple options trades onApple (AAPL) suggested a potential decline in shares. Of the trades made with high volume, the most interesting was the July 2020 $265 put option. That trade saw a six-fold rise in volume with nearly 600 contracts trade. Shares trade around $280, implying at least a $15 per-share downside, or about a 5.3 percent drop. With 212 days until expiration, any move down in Apple shares would allow the option to rally, giving traders a tidy profit. With shares of the tech company up 15 percent in the past month and nearly do...

February call buying indicates more upside to shares.Over 18,150 contracts traded on the February 2020 $52.50 call option onMorgan Stanley (MS). This is a 20-fold increase in volume from the open interest of 933 contracts. With 66 days to go before expiration, shares will need to rally about $1.50 or just under 3 percent for the option to move in-the-money. At a cost of around $1.16, or $116 per option, it’s a relatively inexpensive bet that the rally in financials will continue. Shares of Morgan Stanley have already beaten the overall stock market by 2 points in the past year thanks ...

March call buying suggests rally.Over 6,800 contracts traded on the March 2020 $29 call options onEnterprise Products Partners (EPD). Against the prior open interest of 879, the trading marks an eight-fold jump in volume. Shares of EPD currently trade just under $28, so the options are a bet on another $1 rise in shares in the next 99 days before expiration, or a move just 4 percent higher. Shares have traded as high as $30 in the past year. While the option could offer a profit in the next 100 days, without shares breaking to new highs, it will be somewhat limited, even at the cost of $...