Industrial conglomerate
Honeywell (HON) has been trading in a range over the past year. One trader is betting that shares will trend to the lower end of that range in the coming weeks.
That’s based on the May 17 $185 puts. With 23 days until expiration, 10,018 contracts traded compared to a prior open interest of 175, for a 57-fold rise in volume on the trade. The buyer of the puts paid $1.45 to make the bearish bet.
Honeywell shares recently traded for about $196, meaning shares would need to drop $11, or just over 5%, for the option to move in-the-money. Honeywell has traded between $175 and $210 over the past year.
While Honeywell shares have been flat over the past year, earnings are up 24% on top of a 3% increase in revenues. Plus, the company sports a 15% profit margin, a relatively high level for an industrial company.
Action to take: Honeywell provides long-term investors with excellent returns, and interested investors should look to buy shares in the lower end of its range around $185.
Honeywell is a dividend growth company currently paying a 2.2% yield.
For traders, the very short-term trend suggests a move lower in the coming weeks, which makes the May $185 puts attractive. The options can likely see a mid-double-digit return.
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.