Digital payment platform PayPal (PYPL) is down about 12 percent over the past year, although shares have been trending higher in the past few months. One trader sees that trend continuing in the coming weeks.
That’s based on the June 23 $75 calls. With 42 days until expiration, 4,065 contracts traded compared to a prior open interest of 116, for a 35-fold rise in volume on the trade. The buyer of the calls paid $0.36 to make the bullish bet.
Shares recently traded for about $63.50 following an earnings-report drop. From here, shares would need to rise about 18 percent in about six weeks for the option to move in-the-money. That’s an aggressive move, but shares are volatile enough that some move higher is likely.
PayPal now trades near a 52-week low, and the payment platform is an industry leader trading for about 15 times forward earnings.
Action to take: Shares look attractive near current prices as a long-term buy, as the company will likely continue to dominate digital payments and continue to grow revenues and earnings over the long term. At present, however, PayPal doesn’t pay a dividend.
For traders, some rebound in the coming weeks is likely. That makes the June calls inexpensive, and capable of high-double-digit returns on a move higher in the next few 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.