Freight and logistics company United Parcel Service (UPS) is down 12 percent over the last year as consumer spending on goods has slowed. One trader sees shares trending higher in the coming weeks.
That’s based on the February 9 $170 calls. With 23 days until expiration, 4,416 contracts traded compared to a prior open interest of 231, for a 19-fold rise in volume on the trade. The buyer of the calls paid $1.85 to make the bullish bet.
UPS shares recently traded for about $160, so the stock would need to rise about $10, or about 6.2 percent for the option to move in-the-money.
The strike price is well under the stock’s 52-week high of $197.80.
While shares were only down 12 percent last year, earnings slid by 56 percent and revenues dropped by 13 percent. Despite that poor operational performance, the stock trades at a discount to the S&P 500 at only 16 times earnings.
Action to take: Shares have started trending higher in recent weeks, and improved earnings could potentially help shares continue higher in the months ahead.
Today’s buyers can also get a 4 percent dividend yield.
For traders, the February calls are a short-term play on the current uptrend continuing. That’s a reasonable bet in the coming weeks.
Plus, the option is inexpensive enough that it could see mid-double-digit gains.
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.