Consumer lender Ally Financial (ALLY) is up 12 percent over the past year, lagging the overall market’s returns. One trader sees shares rising in the coming weeks.
That’s based on the March $39 calls. With 48 days until expiration, 4,261 contracts traded compared to a prior open interest of 104, for a 41-fold rise in volume on the trade. The buyer of the calls paid $0.65 to make the bullish bet.
Ally shares recently traded for about $36.50, so the option would need to rise about $2.50, or about 7 percent for the option to move in-the-money.
Shares have been trending higher right now, and are already setting new 52-week highs.
The strike price of the option reflects further grains from here. Ally currently trades at about 9 times forward earnings and at its book value.
Improving credit conditions from lower interest rates this year could help send shares higher as well. Ally saw earnings drop 72 percent over the past year and revenues slid 13 percent, a situation likely to reverse in the quarters ahead.
Action to take: Shares are trading higher as the market sees interest rates declining this year. That trend will likely continue. Investors may like shares here or on any pullback for further gains.
Ally recently started a dividend, which carries a yield of about 3.3 percent.
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 company mentioned in this article.