These 3 Unusually Active Options Are Good Bets to Double Your Money

Today’s jobs report delivered a mixed bag for investors. While wage growth slowed, the unemployment rate was back to a historic low of 3.5% in December, suggesting that a hard landing is still very much in play in the months ahead. 

However, all of the major indexes are up by more than 1.5% in early afternoon trading on the jobs report news.

For my Friday edition covering unusual options activity, I’m looking for good bets for investors to double their money without risking a lot of capital. 

Three call contracts were unusually active in Thursday trading. I like their chances of delivering profits over the next year for call buyers. 

Google’s Looking Good

There is no question that Alphabet (GOOGL) stock is under attack, down nearly 38% over the past 52 weeks. Worries about falling advertising revenues lead the parade of investor concerns.  

However, the concerns about advertising revenue losses are overblown. Google Search is the best game in town. A recession will likely encourage companies that want to retain and grow market share to keep spending. 

Those who opt to save money by cutting back on advertising should a recession rear its ugly head will likely be hurt long-term by any decision to disengage from the end customer. 

In the meantime, Alphabet will continue to generate gobs of free cash flow to invest in innovative businesses that will create even greater free cash flow. It’s an excellent problem to have. 

The Information recently reported that Alphabet’s Google Ventures business invested $100 million in Chronosphere, a tech startup that helps companies monitor and lower their bills for their cloud-based applications. The latest raise values Chronosphere at $1.6 billion. 

Alphabet’s trailing 12-month free cash flow is nearly $63 billion. If its free cash flow were a Fortune 500 company, it would be the 60th largest by revenue. Alphabet’s already the third-largest by profits. 

The Alphabet Jan. 19/2024 $137 call contract didn’t blow the door off volumes yesterday. A total of 2,000 traded, 1.59x the open interest. However, the $168 premium is too hard to ignore. 

With a delta of 0.12827, the current share price of $86.29 needs to increase 15% over the next 379 days for the ask price to double. 

That’s a bet I’ll take every day and twice on Sundays. Of the three call options mentioned in this article, GOOGL is my favorite. 

Doing Business Way Down South

I’m not talking about Florida or Texas.

No, I’m interested in the Jan. 19/2024 $4 call contract for Banco Bradesco (BBD), Brazil’s second-largest private bank. Bradesco got its start in 1943 in São Paulo. Today, it has 76.8 million clients holding 38.0 million accounts. 

At the end of Q3 2022, Bradesco had a loan portfolio of 879 billion Brazilian Real ($167.4 billion), 1.9 trillion Brazilian Real ($361.9 million) in total assets, and 19.2 billion Brazilian Real ($3.7 billion) in recurring revenue. 

The bank continues to invest in technology and innovation. As a result, the number of financial transactions conducted through its mobile and internet platforms has grown from 900 million in the first nine months of fiscal 2020 to 2.2 billion in Q1-Q3 2022. In addition, over these 24 months, it added 5.1 million digital account holders. 

In Q3 2022, its total assets grew sequentially by 7.6%. In addition, its loan portfolio increased by 2.7% over Q2 2022, while its assets under management increased by 6.3%.

I’ve always been a big supporter of Latin American companies. If you eliminate all the political issues, the region has so much potential, especially in Brazil. However, I would be remiss if I didn’t say the risk of investing in Bradesco is undoubtedly greater than Bank of America (BAC).

With a delta of 0.26376, the current share price of $2.80 needs to increase 20% over the next 379 days for the ask price of $0.15 to double. I like those odds.

There’s Iron Ore in Them Thar Hills

The third and final call option to double your money is Cleveland-Cliffs (CLF), the Cleveland-based producer of iron ore and flat-rolled steel. 

As an interesting aside, Alabama Senator Tommy Tuberville bought as much as $115,000 of CLF stock in December, according to a Periodic Transaction Report from the U.S. Senate Office. Of course, politicians buying stock isn’t news. However, anytime someone well-known buys a large amount of stock, it suggests there’s more than passing interest.

The company’s stock over the past year lost approximately 200 basis points more than the S&P 500. 

One of the issues holding it back is the ongoing idling of subsidiary Northshore Mining’s Peter Mitchell open pit mine in Babbit, Minnesota, and its pellet processing facility in Silver Bay, Minnesota. 

In April 2022, as a result of Cleveland-Cliffs acquiring a scrap metal company, reducing the need for iron ore pellets for steelmaking, the company idled the facilities. They will remain idle for at least until April.  

While that’s put the workers at Northshore in limbo for the better part of a year, the company doesn’t appear to be having difficulty raising its steel prices. On Dec. 13, 2022, it announced it would immediately increase prices for all carbon hot-rolled, cold-rolled, and coated steel products by a minimum of $50 per net ton. It now charges $750 per net ton or greater.

Considering that the average net selling price per ton of steel in the first nine months of 2022 was $1.431, the price increase ought to do little to hurt its business. Despite lower volumes in 2022, its revenues have been significantly higher due to increased prices. That’s likely to continue in 2022. 

The July 21 $25 call contract has 196 days to expiration. Based on a $1o7 premium, Cleveland-Cliffs share price has to rise by 21% over the next 28 weeks for the premium to double. CLF hasn’t consistently traded over $20 since June 2022. 

The reopening of the Peter Mitchell mine would help get it there.  

 

More Options News from Barchart

• Unusual Options Activity for Harley-Davidson (HOG) Points to a Contested Arena
• Costco's Sales 7% Growth Shows Its Powerful Appeal to Investors
• A Former REIT on its Way Out Was Unusually Active Wednesday
• Unusual Options Volume for Coty (COTY) Screams a Long-Term Opportunity

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.