Regional bank Fifth Third Bancorp (FITB) is up 38 percent over the past year, beating the overall market. One trader sees shares continuing to perform well in the weeks ahead.
That’s based on the April $38 calls. With 37 days until expiration, 13,840 contracts traded compared to a prior open interest of 104, for a massive 133-fold rise in volume on the trade. The buyer of the calls paid $0.97 to make the bullish bet.
FITB shares recently traded just under $37, and shares would need to rise about $1.30, or about 3.5 percent for the options to move in-the-money.
FITB has been trending higher in recent weeks, and the strike price of $38 would mean breaking to a new all-time high past the current one of $36.98.
While shares have performed strongly, higher interest rates have weighed on lending activity. Earnings have dropped 28 percent, and revenues have lost 2 percent over the past year.
On a valuation basis, shares are inexpensive at 11 times earnings. The bank does trade at 1.4 times its book value.
Action to take: Investors may like shares here as a momentum play. Shares are near 52-week highs and look poised to continue higher. At current prices, Fifth Third shares yield 3.7 percent.
For traders, the April $38 calls are an inexpensive bet on a move higher. The options can likely see mid-to-high double-digit returns in the coming weeks. Traders may want to take a quick profit on any big one-day rally for 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 company mentioned in this article.