Oil and gas exploration company EQT Corporation (EQT) have been soaring in the past few months, but shares have started to weaken recently. One trader sees the potential for a rebound in the weeks ahead.
That’s based on the June $49 calls. With 53 days until expiration, 11,878 contracts traded compared to a prior open interest of 567, for a 21-fold jump in volume on the trade. The buyer of the calls paid $1.95 to enter the trade.
Shares recently traded around $42, so they would need to rise $7, or about 17 percent for the option to move in-the-money. The strike price would also be just over the 52-week high of $45.50 per share.
Even with the recent pullback, the stock is up 152 percent over the past year. Revenue is up 237 percent, although the exploration company hasn’t been profitable in the past year.
Action to take: Investors may like shares for further upside in the energy space here. The stock also yields 1.1 percent, after the dividend was just raised from $0.12 to $0.50 recently.
For traders, the June calls have enough time to play out and are pricing in a reasonable move higher in the coming weeks. They stand to deliver high double-digit returns or better on a move higher in shares.
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.