Specialty chemical company Huntsman Corporation (HUN) is down 20% over the past year, but has been trending higher over the past few weeks. One trader sees shares trending higher over the coming weeks.
That’s based on the September $23 calls. With 23 days until expiration, 9,086 contracts traded compared to a prior open interest of 138, for a 66-fold rise in volume on the trade. The buyer of the calls paid $0.25 to make the bullish bet.
Huntsman shares recently traded for about $22, meaning the stock would need to rise by $1.00, or about 4.5%, for the option to move in-the-money.
The $23 strike price is about midway between the 52-week low of $19.91 and 52-week high of $28.36.
While earnings grew by 15% in the past year, Huntsman still failed to break an overall profit, and revenues dropped by 1%. Specialty chemical companies tend to be correlated to the perceived strength of the overall economy.
Action to take: With shares trending higher in the short-term, there may be some upside ahead, especially if lower interest rates lead to a perceived improvement in economic growth.
At current prices, Huntsman also pays a 4.6% dividend.
For traders, the September $23 calls have a few weeks to play out, but are inexpensive enough to provide traders with high double-digit returns or better.
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.