Unusual Options Activity: Zions Bancorporation (ZION)

Banking

Regional bank Zions Bancorporation (ZION) is up 23% over the past year, slightly beating out the overall market. One trader sees shares continuing higher over the coming months.

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  • That’s based on the October $45 calls. With 72 days until expiration, 6,069 contracts traded compared to a prior open interest of 150, for a 40-fold rise in volume on the trade. The buyer of the calls paid $4.10 to make the bullish bet.

    Zions shares recently traded for about $46, making these calls about $1.00 in-the-money already. Shares recently pulled back sharply with the overall stock market, leaving the stock just off its 52-week high of $53.32.

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    Even with the recent pullback, Zions trades at less than 11 times forward earnings. Those earnings grew at 15% last year, even amid a challenging environment for the banking sector. Plus, the bank scored a 22% profit margin last year, a healthy level for a bank.
    Action to take: Investors may like shares here as a pullback play. The stock’s longer-term uptrend is likely to continue as current market fears abate. At current prices, Zions also pays a 3.5% dividend.

    For traders, the October $45 calls are well positioned for a share rebound over the coming weeks. While a bit pricey, already being in-the-money following a big selloff gives the options some protection against further market volatility ahead.

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    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.