Energy giant ConocoPhillips (COP) is up over 20 percent in the past year, nearly triple the return of the S&P 500. One trader sees shares trending higher in the months ahead.
That’s based on the October $135 calls. With 70 days until expiration, 8,312 contracts traded compared to a prior open interest of 140, for a 59-fold rise in volume on the trade. The buyer of the calls paid $0.65 to make the bullish bet.
Shares recently traded around $116, so they would need to rise about $19, or just over 16 percent, for the option to move in-the-money. The strike price of the option is close to the stock’s 52-week high of $138.49, set last October.
Oil prices have been trending higher in recent weeks, moving back over $80 per barrel. That may help the company trend higher in the months ahead as well. Shares are still inexpensive at 12 times forward earnings.
Action to take: Investors may like shares here or on any drop lower. The oil major yields about 2.1 percent at current prices. That payout can likely increase over time, especially if oil prices stay higher for longer.
For traders, the October calls play to the seasonality of the oil market. If Conoco follows on past years and trends higher in the coming months, these inexpensive options could see triple-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 of the companies mentioned in this article.