Shipping giant Nordic American Tankers (NAT) is up 32 percent over the past year, beating the S&P 500’s returns by about 50 percent. One trader sees shares continuing higher in the next few months.
That’s based on the February 16, 2024 $5.00 calls. With 57 days until expiration, 9,866 contracts traded compared to a prior open interest of 144, for a 68-fold rise in volume on the trade. The buyer of the calls paid $0.23 to make the bullish bet.
Nordic American recently traded for about $4.30, so shares would need to rise $0.70, or about 16 percent, for the option to move in-the-money. The strike price is near the stock’s 52-week high of $4.83.
Shipping costs have jumped in recent days, as traffic is being rerouted around the Red Sea. That could help improve Nordic’s operating performance, as revenues have been flat over the past year, and earnings are down 25 percent.
Action to take: Investors may like shares here, as the shipping industry take time to absorb changes like longer routes, resulting in higher prices and profits before new ships can come online. Nordic also yields about 5.7 percent at current prices.
For traders, the February $5 calls are well positioned for any jump higher on further global disruptions. Traders can likely see high double-digit returns, given the low cost of the calls.
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 of the companies mentioned in this article.