Oil and gas operator Occidental Petroleum Corporation (OXY) has seen shares rise 7 precent in the past year. More importantly, Berkshire Hathaway (BRK-A) has been buying up shares as they drop to the low $60 range.
One trader sees a bullish move ahead for the stock following the latest drop. That’s based on the March 31 $63 calls. With 21 days until expiration, 4,625 contracts traded compared to a prior open interest of 229, for a 20-fold rise in volume.
The buyer of the calls paid $1.82 Shares recently traded just over $62, to shares need to rise less than $1, or about 1.5 percent, for the option to move in-the-money. Such a move is easily possible in the next few weeks. The strike price is also well under the stock’s 52-week high of $77.13.
Operationally, the company has been performing better than the share price. Earnings jumped 25 percent in the past year, thanks to strong energy prices. And Occidental sports a hefty 36 percent profit margin.
Action to take: Investors may like shares here. While the dividend yield is on the low end for the industry at 1.2 percent, it’s a growing one. And the shares continue to get acquired by Berkshire Hathaway, which will likely end up buying the entire company at a premium at some point.
For traders, the options are a reasonable short-term trade, that can potentially deliver mid-double-digit returns in the coming weeks.
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.