Shares of energy producer Northern Oil & Gas (NOG) have more than doubled in the past year. One trader sees that trend continuing as energy prices continue higher.
That’s based on the June $30 calls. With 143 days until expiration, 2,577 contracts recently traded compared to an open interest of 108, for a 24-fold jump in volume. The buyer of the calls paid $1.45 to make the trade.
With a current share price near $23, shares would need to rally a further 30 percent between now and June for the options to move in-the-money. The stock has traded as high as just under $28 in the past year, making this option trade feasible.
The company is just returning to profitability, and shares look cheap at 3 times forward earnings.
Action to take: Investors may like shares here. While the stock yields just under 1.4 percent, the dividend payout was recently quadrupled, and rising energy prices could lead to further increases in the quarters to come.
Traders may like the June calls, as energy prices have held up well as other parts of the market have been selling off in recent weeks. Traders can likely nab mid-to-high double-digit returns on the trade before expiration, and may want to look at taking profits if the calls move in-the-money.
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.