Regional bank Huntington Bancshares (HBAN) has been on a tear, rallying 60% over the past year, producing nearly twice the returns of the S&P 500. One trader sees shares trending higher in the weeks ahead.
That’s based on the December 20 $19 calls. With 35 days until expiration, 5,377 contracts traded compared to a prior open interest of 154, for a 35-fold rise in volume on the trade. The buyer of the calls paid $0.20 to make the bullish bet.
Huntington shares recently traded for about $17.60, so shares would need to rally by $1.40, or about 8%, for the option to move in-the-money.
The strike price of the option is also right at Huntington’s 52-week high of $17.97.
Banks are likely to benefit from increased lending and refinancing activity as interest rates trend lower. Huntington has had a lackluster year, with earnings down 5% and revenues down 1%, a trend that could reverse with more economic activity.
And even with the big rally over the past year, Huntington shares are still inexpensive at 13 times earnings.
Action to take: Investors may like shares here, as the stock is in an uptrend and poised to continue higher. Plus, at current prices, Huntington pays a 3.5% dividend.
For traders, the December $19 calls are inexpensive, and could see returns into the triple-digits given their low cost, and depending on how quickly shares continue to trend 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 company mentioned in this article.