Oil and gas exploration and production company
Suncor Energy (SU) is slightly down over the past year as energy prices have moderated. One trader sees shares trending higher into the end of the year.
That’s based on the December $34 calls. With 119 days until expiration, 45,164 contracts traded compared to a prior open interest of 317, for a 142-fold rise in volume on the trade. The buyer of the calls paid $1.27 to make the bullish bet.
Shares last traded just under $32. So Suncor shares would need to rise about 7 percent for the option to move in-the-money. The strike price is still well under the stock’s 52-week high of $37.23.
Like many energy stocks right now, shares are inexpensive relative to the overall market. Suncor trades at 7 times earnings, and the stock yields just over 5 percent at today’s prices.
Action to take: Investors may want to consider buying some shares here, given the company’s strong valuation and high current income. Prices will move higher or lower with oil, and could see a drop in a recession, which would create an opportunity to add more shares.
For traders, shares have been knocked down in the short-term and look ready for a bounce higher. That could bode well for the December calls, which have plenty of time for a rebound trade to play out.
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.