Oil and gas exploration company Northern Oil & Gas (NOG) is up 35% over the past year, higher than the overall market. One trader is betting the outperformance will continue in the next six months.
That’s based on the September $42 calls. 2,602 contracts traded compared to a prior open interest of 101, for a 26-fold rise in volume on the trade. The contracts have 183 days left until expiration. The buyer of the calls paid $2.30 to make the bullish bet.
NOG shares recently traded for about $39. Shares would need to rise $3, or about 7.7%, for the option to move in-the-money. The strike price is just shy of NOG’s 52-week high of $43.64.
Shares have been trending higher since February after being in a downtrend since last summer.
Over the last year, revenues are up 23%, and earnings have jumped 168%.
Action to take: Even with their run higher, shares trade at just 6 times forward earnings. With NOG shares in a strong uptrend, there’s a lot for momentum traders to like here.
At current prices, NOG pays a 4.2% dividend.
For traders, the September calls look attractive. They have plenty of time to play out, and shares tend to see seasonal strength through the summer. Traders can likely nab high double-digit returns on the options.
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.