Shares of oil and gas exploration company Devon Energy Corporation (DVN) are up about 60 percent in the past year. One trader sees a further rally in shares in the coming weeks.
That’s based on the November 25 $76 calls. With 18 days until expiration, 14,059 contracts traded compared to a prior open interest of 243, for a 45-fold rise in volume on the trade. The buyer of the calls paid $1.23 to make the bullish bet.
Shares recently traded near $71, so they’d need to rise about $5, or just over 7 percent, for the option to move in-the-money.
Devon stock was trending towards $80 before a big drop lower last week, which the company is now starting to recover from, so there’s a strong chance the option moves in-the-money.
Action to take: The stock will likely move on headline prices moves in oil and natural gas prices. With the winter season approaching, that could bode well for shares, especially after their recent drop.
Investors are paid a variable dividend, but amid today’s high energy prices, shares are likely to yield close to their 8 percent rate from the last year.
For traders, the options are well priced, even if they only have just over two weeks to play out. Traders can likely nab a quick mid-double-digit move. The option could see bigger gains, but in today’s volatile markets, there’s a strong chance for a quick win here.
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.