Utility producer The AES Corporation (AES) is down 30 percent over the past year as higher interest rates have weighed on the sector. One trader sees shares trending higher in the coming weeks.
That’s based on the April $16 calls. With 35 days until expiration, 5,378 contracts traded compared to a prior open interest of 127, for a 42-fold rise in volume on the trade. The buyer of the calls paid $0.60 to make the bullish bet.
AES Corporation shares recently traded for about $15.75, making this an at-the-money option. The strike price of the option is closer to the stock’s 52-week low of $11.43 than the high of $25.74.
The past year has been a struggle for AES, as the company has reported a loss, and revenues dropped by 3 percent.
However, the company expects a rebound, and share snow trade at an estimated 8 times forward earnings.
Action to take: Investors may like shares while they’re still out of favor. The price drop over the past year has pushed the dividend up to 4.2 percent, and shares will likely move higher as interest rates ease later this year.
For traders, the April $16 calls are aggressive in that they only have a few weeks to play out. But they can still see mid-double-digit returns before expiration for nimble traders.
Less aggressive traders may want to look further 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 company mentioned in this article.