Shares of Norwegian oil and gas company Equinor ASA (EQNR) have traded flat over the past year, underperforming the energy sector. One trader sees shares closing that gap by the end of 2023.
That’s based on the January 2024 $38.99 calls. With 325 days until expiration, 10,200 options traded compared to a prior open interest of 134, for a 76-fold rise in volume on the trade. The buyer of the calls paid $1.60 to make the bullish bet.
Shares recently traded for about $31.50, so Equinor would need to rally about 24 percent for the options to move in-the-money. The company has a 52-week high of $42.53, so such a move in the coming months is possible.
Earnings have jumped 134 percent over the past year, and revenues are on the rise. And the company has more cash than debt on the books.
Action to take: Investors may like shares at current prices or lower. Equinor yields 2.6 percent at current prices, and has a low payout ratio of under 10 percent of earnings. The downside is that Equinor’s operational performance is based on the Norwegian kroner, so there may be currency impacts that weigh on shares.
For traders, the January calls are inexpensive, and can likely deliver mid-double-digit returns well before the options expire. Traders may want to take a quick profit rather than let the trade play out.
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.