Shares of specialty chemical company Air Products and Chemicals (APD) have been on the decline. One trader is betting on a rebound in the coming months.
That’s based on the September $280 calls. With 106 days until expiration, 10,301 contracts traded compared to a prior open interest of 141, for a 73-fold jump in volume on the trade. The buyer of the calls paid $2.95 to get in.
Shares recently traded for about $246, so the stock would need to rise about 14 percent for the option to move in-the-money. That would still leave shares well under their 52-week high of $316.
The company has seen revenue and earnings rise by double-digits in the past year, even with the decline in price. That leaves shares at about 23 times forward earnings, down from 33 times a year ago.
Action to take: APD is a quintessential dividend growth stock, with shares currently yielding about 2.6 percent, and with a strong history of growth.
For traders, the call option is a good way to capitalize on a potential market rebound in the coming months. The option can likely deliver mid-double-digit gains in the coming months. Traders should be mindful of another potential market slide, and look to close out the position early if necessary.
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.