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Friday, March 1, 2024

3 Unusually Active Call Options to Buy Now for the Long Haul

March couldn’t have come any sooner. I shoveled enough snow in February. 

As for the markets, the S&P 500 closed February up 5.2%, the index’s best February since 2015. The Nasdaq also had a strong showing, gaining 6.1%, its best return since 2015. The Dow didn’t have nearly as good a showing in the past month, up 2.1%. It must’ve been a poor showing from Boeing (BA) ↗ and some of the other 29 names in the index. 

It’s Friday, so it’s time for me to look for three unusually active options from Thursday’s trading worth investor consideration.

In today’s edition, I’ve landed on three call options with more than 90 days to expiration whose stocks are good long-term buys. 

Have an excellent weekend!

Grupo Financiero Galicia 

Based on the call options that were unusually active in Thursday trading and expired after May 25, Grupo Financiero Galicia (GGAL) ↗ had the highest Vol/OI ratio at 33.38. I’ll get back to the option shortly, but first, I’ll fill you in on the company. 

Based in Argentina, the holding company’s history dates back to 1905, when immigrants from the Galician region of Spain founded Banco Galicia. It went public in 1907, becoming Argentina’s largest nongovernment bank in 1969. 

The holding company was created in 1999 by the three founding families. Those families own 19.1% of the company’s equity and 54.1% of the votes. It is a “controlled company.”

Banco Galicia holds nearly 11% of the private sector loans in Argentina, with more than three million customers. 

For the nine months ended Sept. 30, 2023, it had a net income of 162.6 billion Argentine pesos ($193 million), up 174% from 2022. Its return on assets in the third quarter was 3.36%, 170 basis points higher than Q3 2022. It finished the third quarter with deposits of 3.83 trillion Argentine pesos ($4.54 billion) and loans of 2.28 trillion Argentine pesos ($2.71 billion). 

GGAL stock is up 30% in 2024, 64% over the past year, but down 24% over the past five years. It last traded above $35 in July 2019, which brings me to the call option.

The July 19 $35 call had a volume of 8,044 on Thursday, which is 33.38x the open interest. Based on an ask price of $1.10, the down payment was 3.1%. You can double your money on the call with a $6.68 increase in its share price over the next 140 days. 

While the odds of its share price increasing by $13 over the next 20 weeks seems a bit much, half of that isn’t out of the realm of possibility. 

If you’re a fan of Latin American companies like me, Grupo Financiero Galicia is worth a look.    

Verisk Analytics

Verisk Analytics (VRSK) ↗ started in 1971 as an insurance rating bureau helping its insurance customers better analyze risk in their businesses. Today, its sole focus is to be the global insurance industry’s leading strategic data, analytics, and technology partner.

“Our customers, acquired over more than 50 years, include most of the P&C insurance providers in the U.S. In recent years, we have expanded our offerings to serve certain non-U.S. markets and into the fields of life insurance and annuities, as well as insurance marketing,” states the company’s 2023 10-K. 

The company earns approximately 80% of its revenue through one-year subscriptions for its data analytics solutions. They pay upfront for these subscriptions. As a result, its cash flow in the first quarter outweighs all others. 

Its revenue is divided between underwriting (71%) and claims (29%). In 2023, its organic constant currency (OCC) revenue grew 8.7%. That’s on top of 6.5% growth in 2022 and 6.9% in 2021. Its total revenue in 2023 was $2.68 billion, with an adjusted EBITDA margin of 53.5%. Its total debt of $2.85 billion is 2x EBITDA. 

In 2024, it expects revenue of at least $2.84 billion with $1.54 billion in adjusted EBITDA, good for a 54.2% margin, 70 basis points higher than in 2023.

Its shares are up 36% over the past year. 

The June 21 $260 call has a Vol/OI ratio of 10.23 on Thursday. The ask price was $5.20, a 2% down payment on the $260 strike. With a delta of 0.31755, you can double your money with a $16.38 increase in its share price. To exercise your right to buy 100 shares, VRSK will have to appreciate by at least $23.30 over the next 16 weeks for you to consider doing so. 

Based on its closing price of $241.90, that’s less than 10%. Very doable.    

Vistra Corp.

I’m unfamiliar with Vistra Corp. (VST) ↗, based in Dallas and one of the country’s largest electricity providers. It serves approximately five million residential, commercial, and industrial retail customers from California to Maine. 

The company used to be called Texas Competitive Electric Holdings, the parent company of TXU Energy and Luminant. It emerged from bankruptcy protection in 2016. It was rebranded as Vistra Energy later that year. Several acquisitions after, it dropped the “Energy” from its corporate name. 

In 2023, its net income from ongoing operations was $1.5 billion with adjusted EBITDA of $4.14 billion, 33% higher than a year earlier. In 2024, it expects EBITDA to be flat to 2023. 

While only five analysts cover Vistra stock, according to Barchart.com data, they all rate it a Strong Buy (5 out of 5). The Barchart Technical Opinion also rates it a Strong Buy

As for the call option from yesterday, it was the June 21 $65 strike with a $1.45 ask price. That’s a 2.2% down payment on its shares. On a straight-up basis, its shares must appreciate by 19% over the next four months for you to consider exercising the call.

With a double available with an increase of $5.99 over the same period (11% increase) and an outlay of just $145, the downside is minimal.  

On the date of publication, Will Ashworth ↗ did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here ↗.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

BFIA Admin
BFIA Admin
The big boss.

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