Shares of supply chain service company
Flex (FLEX) have been trading in a range over the past year. The stock has recently bounced to the top end of its range, and one trader is betting on a new breakthrough in the coming weeks.
That’s based on the May $20 calls. With 46 days until expiration, 10,639 contracts traded compared to an open interest of 202, for a 53-fold surge in volume. The buyer of the calls paid $0.60 to make the trade.
Shares recently traded for about $18.50, so they would need to rise just under 10 percent to move in-the-money in the next few weeks. The company is also set to report its next earnings announcement in early May.
The stock has traded relatively flat over the past year, and shares trade at just over 9 times forward earnings. If growth comes in higher than expected, shares are poised to benefit.
Action to take: The stock doesn’t pay a dividend, so shareholders might want to look elsewhere in the supply chain and logistics space one for some income, as this would purely be a play on capital appreciation.
For traders, the option is inexpensive enough that on a strong earnings beat and rising share price, the trade could potentially double (or better). However, given the range-bound nature of shares in the past year, it’s also possible that the option loses all its value if shares don’t break higher.
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.