Uranium explorer and producer NextGen Energy (NXE) is up over 130% in the past year thanks to strong demand for the energy source. One trader sees further gains in the next five months.
That’s based on the September $11 calls. With 168 days until expiration, 10,173 contracts traded compared to a prior open interest of 159, for a 64-fold rise in volume on the trade. The buyer of the calls paid $0.70 to make the bullish bet.
NextGen shares recently traded for just under $9, so they would need to rise by just over $2, or 22%, for the option to move in-the-money. Shares are already at their 52-week high of $8.87.
NextGen is still unprofitable, reporting a slight loss in the past year. However, the company has nearly $300 million in cash, and is on track for rising revenue from its proven uranium reserves.
Action to take: Shares will likely tend higher or lower on uranium prices. The long-term trend looks bullish for uranium, following years of underproduction and a reduction in global inventories.
Investors may want to buy a starting position here, and use any market weakness to add to that position.
For traders, the September $11 calls are a bit aggressive, but could play out well if uranium prices continue to trend higher. Traders can likely see high double-digit returns or better as the trade plays out.
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.