Shares of energy giant
ExxonMobil (XOM) have been soaring higher with rising oil prices in the past few months. One trader expects that trend to continue in the next few months as well.
That’s based on the June $52.50 calls. With 125 days until expiration, 11,429 contracts traded compared to a prior open interest of 112, for a staggering 102-fold jump in volume. The buyer of the calls paid $26.55 to make the trade.
Shares have recently been trading for about $79, making the $52.50 calls about $26.50 in-the-money. That means the buyer of the options paid nearly no premium for the option right now.
Action to take: Oil prices are likely to keep trending higher, even with a barrel now going for about $90. Shares are likely to continue rallying from their 61 percent gain over the past year.
Investors can buy shares here and pick up a 4.4 percent dividend yield, which may increase over time as profitability expands from continued rising energy prices.
For traders, the June calls are expensive, but potentially worth it. As a play already in-the-money and with no premium attached to them, a further rise in shares should lead to a dollar-for-dollar increase in the value of the options.
While the option isn’t likely to double, it can still offer mid double-digit gains in the next few months.
Disclosure: The author of this article has no position in the company mentioned here, and does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.