Shares of uranium mining giant Cameco (CCJ) have had a stellar year thanks to a strong commodity market and rising uranium prices. One trader sees that trend continuing in the first half of this year.
That’s based on the June $32 calls. With 146 days until expiration, 6,041 contracts traded compared to a prior open interest of 179, for a 34-fold increase in volume. The buyer of the calls paid $0.85 to make the trade.
With shares last going for about $22, the stock would need to rise just over 45 percent to hit a price $10 higher before the option expires in June.
Shares of the company have already rallied 78 percent in the past year, so it would take a big move higher in the commodity space. However, as shares are in an uptrend, this option in an inexpensive way to play that trend higher.
Action to take: Investors may like shares here, but strictly as a momentum play. The company is still coming off some losses, and hasn’t been profitable in three of the last four quarters. Shares pay a 0.3 percent dividend for now, but without higher earnings, that dividend may not be sustainable.
Nevertheless, traders may like the June calls. They’re inexpensive enough to potentially double, depending on how strong shares perform in the coming months. Traders should look for a reversal in the current uptrend to take profits on such a trade.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.