Shares of information technology firm NCR Corporation (NCR) have been trading in a range over the past year. One trader sees shares rallying from this lower part of its range to the higher part.
That’s based on the July $40 calls. With 128 days until expiration, 3,411 contracts traded compared to a prior open interest of 142, for a 24-fold jump in volume. The buyer of the calls paid $3.15 to get into the trade.
With shares currently around $36.50, the option would move in-the-money if shares rallied about 9.5 percent from here.
Given the stock’s 52-week high of $50, such a move looks possible in the next few months.
Shares are up about 10 percent over the past year, even after coming down so far from their recent highs. With revenue up 25 percent in the same timeframe, a move higher looks likely as current market fears wane.
Action to take: Investors may like shares for a rebound, as they don’t have to worry about the declining time premium compared to buying an options trade. While shares look set to move higher, the stock doesn’t pay a dividend at present.
For traders, the July calls are well priced, and a sharp move higher in shares in the coming weeks could lead to mid-to-high double-digit gains. Traders should look to take profits on a quick jump higher on shares from here.
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.