Investment bank
Jefferies Financial Group (JEF) has had a strong year, with shares up over 40%. One trader sees shares trending even higher through the autumn.
That’s based on the September $50 calls. With 140 days until expiration, 3,003 contracts traded compared to a prior open interest of 120, for a 25-fold rise in volume on the trade. The buyer of the calls paid $0.67 to make the bullish bet.
Jefferies shares recently traded for about $43, so the stock would need to rise by $7, or 16%, for the option to move in-the-money. Shares would also need to break past their old 52-week high of $57.39, set back in March.
Jefferies is performing well as the financial sector continues to expand. Revenues soared 35% last year, and earnings rose by 21%.
Yet shares are still inexpensive at 13 times forward earnings. Plus, shares trade near their book value, a strong sign among the investment bank stocks.
Action to take: Investors may like shares here, as they are forming a base following the recent pullback and are starting to trend higher. At current prices, Jefferies also pays a 2.8% dividend.
For traders, the September calls are far out-of-the-money, but shares are trending in that direction. The options could see high-double-digit returns or better in the coming months.
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.