Unusual Options Activity: Procter & Gamble (PG)

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Consumer goods company Procter & Gamble (PG) is up 7% over the past year, underperforming the market amid fears of a consumer spending slowdown. One trader is betting on a rally higher in the weeks ahead.

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  • That’s based on the August 30 $175 calls. With 24 days until expiration, 15,722 contracts traded compared to a prior open interest of 143, for a 49-fold rise in volume on the trade. The buyer of the calls paid $0.91 to make the bullish bet

    Procter & Gamble shares recently traded for about $170, meaning shares would need to rally by $5, or about 3%, for the option to move in-the-money.

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    Shares just hit a new 52-week high of $170.92, so the stock would need to continue trending higher.

    The company has had a lackluster year, with revenues declining 0.1% and earnings dipping by 7.3%.
    Action to take: With P&G shares trending higher and breaking to new highs, shares make sense as a momentum play now. The company’s defensive nature in a slowing economy could allow it to hold up better than other stocks.

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  • At current prices, shares pay a 2.4% dividend. P&G has a strong history of dividend growth.

    For traders, the August $175 calls are aggressive, with just a few weeks to play out. But shares could continue higher from here, allowing the option to deliver high double-digit returns.

     
    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.