Shares of uranium producer Cameco (CCJ) have risen 26 percent in the past year, on renewed interest in nuclear power and rising uranium prices. One trader sees that trend continuing through the end of the year.
That’s based on the December $37 calls. With 100 days until expiration, 22,667 contracts traded compared to a prior open interest of 101, for a 224-fold explosion higher in volume. The buyer of the calls paid $1.40 to make the trade.
Shares recently traded for about $29, so they would need to rise $8, or about 28 percent for the option to move in-the-money. That would also set a new record high for shares given their 52-week high of $32.49.
The uranium producer hasn’t returned to profitability yet, following several lean years for uranium prices. But now that prices are rising, revenue has jumped 55 percent in the past year.
Action to take: Long-term, higher commodity prices seem likely. It’s also a space that can have big swings relative to the overall market right now. That’s a sign that the stock may be worth accumulating as markets trend down again. At today’s prices, investors will get a 0.3 percent dividend.
For traders, the long-term call is an inexpensive way to bet a big move higher. The options can potentially deliver high-double-digit returns or better in the coming weeks. Given today’s volatility, traders can look to buy on a down day for shares and flip the position on an up day.
Disclosure: The author of this article has no position in the companies mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.