Shares of United Parcel Service (UPS) dropped to a 52-week low last Thursday, and shares are now down 20% over the past year. One trader sees a rebound in the coming weeks.
That’s based on the June 21 $136 calls. With 18 days until expiration, 10,588 contracts traded compared to a prior open interest of 109, for a 97-fold rise in volume on the trade. The buyer of the calls paid $3.40 to make the bullish bet.
UPS recently traded just over $136, making this an at-the-money trade. In intra-day trading last week, shares hit a 52-week low of $133.63.
The freight and logistics company has performed poorly in the past year. Declining demand for services resulted in revenues dropping by 5%, and earnings are off 41%.
Despite those drops, UPS remains an industry leader. And shares now trade at less than 17 times forward earnings, a slight discount to the overall stock market.
Action to take: With shares at a 52-week low, they may bounce around a bit before starting a new trend in either direction. Today’s buyers can get a 4.8% dividend at current prices, another sign that shares may be near their lows for some time.
For traders, the June 21 calls don’t have much time to play out. But they could see high double-digit returns if the stock pops higher in the coming days. Traders should look to take quick profits.
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.