Wildlife and pest control company Rollins (ROL) is up 20% over the past year, slightly underperforming the overall stock market. One trader sees shares trending higher through the summer.
That’s based on the August $52.50 calls. With 52 days until expiration, 3,936 contracts traded compared to a prior open interest of 116, for a 34-fold rise in volume on the trade. The buyer of the calls paid $0.88 to make the bullish bet.
Rollins shares recently traded for about $49.50, meaning the stock would need to rise by $3, or about 6%, for the option to move in-the-money.
Meanwhile, Rollins shares have been trending higher over the past few months, and are right near their 52-week high of $50.09.
At the operational level, Rollins has shown some growth recently, with earnings up 7% over the past year, and revenues are up nearly 14%. However, shares are priced somewhat expensively at nearly 50 time forward earnings.
Action to take: While the valuation is a little high, shares are trending higher. Momentum investors can likely see double-digit returns in the months ahead. And, at current prices, Rollins pays a 1.2% dividend.
For traders, the August $52.50 calls play well to the current uptrend. They can potentially see high-double-digit returns if the current rally holds over 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 company mentioned in this article.