Shares of stock exchange owner Intercontinental Exchange (ICE), are up about 10 percent over the past year, just slightly edging out the overall stock market. One trader is betting on a further rally into next year.
That’s based on the January 2024 $180 calls. With 128 days until expiration, 2,807 contracts traded compared to a prior open interest of 110, for a 26-fold rise in volume on the trade. The buyer of the calls paid $0.10 to make the bullish bet.
Shares recently traded for about $115, so they would need to rise by $65, or over 56 percent, for the option to move in-the-money. It would also mean shares would need to break above their 52-week high of $118.79.
That’s a big move higher for the stock, but with the low price of the option, it wouldn’t take much of a move for triple-digit gains.
With markets recovering from last year’s selloff, the company’s prospects are improving. Earnings are up 44 percent, on a 4 percent rise in revenues. And the exchange sports a healthy 23 percent profit margin.
Action to take: Shares look slightly undervalued to the overall markets at 19 times forward earnings. And the growth rate and profit margin could lead to shares trending higher in the months ahead. Today’s buyers will also get a 1.4 percent dividend yield.
For traders, some move higher is likely. The January $180 calls are inexpensive enough for a big percentage return for a small amount of capital.
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.