Chemical manufacturer Dow (DOW) is down over 25 percent in the past year. One trader sees a rebound ahead in the coming weeks.
That’s based on the June 30th $53 calls. With 24 days until expiration, 18,807 contracts traded compared to a prior open interest of 111, for a 169-fold jump in volume on the trade. The buyer of the calls paid $0.70 to make the bullish bet.
Shares recently traded for just over $51.50, so the stock would need to rise less than $1.50, or about 3 percent, for the option to move in-the-money. The stock did hit a 52-week low of $42.91 recently before starting to rebound.
Going for 12 times earnings, the chemical manufacturer is cheap compared to the overall stock market, although revenues are down about 22 percent over the past year. That trend may continue as long as the global economy continues to weaken.
Action to take: Investors may like shares here near the low end of their range. The drop in price over the past year has pushed the dividend yield up to 5.7 percent.
For traders, the June calls don’t have much time to play out. But with an uptrend likely underway now, the option could move in-the-money and deliver high-double-digit returns or better in the weeks ahead.
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.