Thursday's Unusual Options Activity Reveals 3 Promising Long-Term Investments

We’ve come to the end of another work week. There are just 22 trading days left in 2024. With the S&P 500 up over 25% year-to-date, it’s safe to assume the index will finish the year in positive territory for the eighth time in the past decade.

The week was full of intriguing political nominations to serve in Donald Trump’s second go-round as President. As a Canadian, I can only stand on the sidelines and wonder what will come in the next four years. As they say, “When the U.S. sneezes, Canada catches a cold.” 

The markets this week were somewhat subdued after the zaniness of the post-election period. I suspect they will remain relatively tame for the remainder of the year, with volatility returning once Trump is sworn in on Jan. 20.

In the meantime, I’m on tap to discuss unusual options activity from Thursday’s trading.

I’ve found 33 call options with unusually high activity boasting expiration dates of 365 days or more. These three are promising long-term investments using options.

Have an excellent weekend!

The Call Options Cometh

Below are the three unusually active call options that make sense as long-term investments from the 33 expiring in 365 days or longer. The DTEs' durations range from a low of 428 (four of them) to 792 days (two), with one at 764 for good measure. I’ll run down each of the stocks and why I like them.       

Las Vegas Sands 

I’m not a gambler, but that doesn’t mean I have a problem with it. To me, when handled responsibly, gambling is a form of entertainment, no different than attending a Taylor Swift concert or an NFL football game. 

It’s not been a good time for Las Vegas Sands (LVS) stock, losing nearly 23% over the past five years. Casino stocks have lost out to trendier sports-betting plays such as DraftKings (DKNG), up 308% over the same period. It hasn’t helped the company that the Macao market hasn’t returned to pre-pandemic levels--and they may never do so. 

However, its trailing 12-month revenues through Sept. 30, according to S&P Global Market Intelligence, were $11.32 billion, just $810 million off its 2019 result. Further down the income statement, its operating profit was $2.57 billion, about $880 million shy of 2019, so it’s close. 

Las Vegas Sands’s all-time high was around $140 in 2007. At that time, its enterprise value was 19x sales. Today, it’s around 4.2x. 

The Jan. 16/2026 $57.50 call had an ask price of $4.00, which is a downpayment of 6.5% on 100 shares. LVS has to appreciate 27% over the next 14 months, including the premium paid, to be in the money. Its ITM probability is 30.80%. 

Nu Holdings

The good news is that Warren Buffett’s holding company owns shares of Nu Holdings (NU), the Latin American fintech. The not-so-good news is that Berkshire Hathaway (BRK.B) reduced its position in the third quarter by 20.7 million shares to 86.4 million. It now owns just 1.8% of Nu. 

Analysts are lukewarm about its stock. Of the 21 covering it, 10 rate it a Buy, with a median target price of $15, about where it's currently trading.

Its stock has gained 72% over the past 52 weeks, so Buffett was likely taking some profits off the table. 

The company’s Q3 2024 results included earnings per share of 11 cents, 83% higher than a year earlier, with a 37% increase in revenue to $2.94 billion. There is nothing wrong with its financial situation. 

The Jan. 16/2026 $30 call had an ask price of $0.30, which is a downpayment of 1.0% on 100 shares. LVS has to double over the next 14 months, including the premium paid, to be in the money. Its ITM probability is very low at 4.74%. 

However, you can double your money if it appreciates by $3.35 (22%) over this period and sell the call before expiry. That looks doable.

Pfizer

Regarding stock performance, Pfizer (PFE) is another hard-luck story, like Las Vegas  Sands. It is down over 12% in 2024 and 26% over the past five years, nearly 75 percentage points worse than the Health Care Select Sector SPDR Fund (XLV). Fortunately, for long-suffering shareholders, it has a healthy 42-cent quarterly dividend (6.5% yield) to help keep the total return close to positive. 

Thanks to Robert F. Kennedy Jr.'s nomination to head the Department of Health and Human Services, vaccines face a potentially uphill battle with an anti-vaxxer in charge of America’s healthcare policies as if the company needed any more challenges.

How does PFE stock return to its December 2021 all-time high of $61.71? Let me count the ways. The most obvious answer is through the company’s drug pipeline. 

Covid was great for business, but it was a time-limited opportunity that remained surprisingly strong despite the virus being on a low simmer rather than a significant boil, as it was in 2021.

At the end of October, it reported Q3 2024 results. Its Covid treatment, Paxlovid, delivered $2.7 billion in revenue in the quarter, 387% higher than analyst estimates. As a result, it raised its 2024 outlook for Pavlovid and Comirnaty (Covid vaccine) revenue by $2 billion to $10.5 billion, or 17% of its total projected revenue of $62.5 billion at the midpoint of its guidance. 

It expects its other drugs to generate $52.5 billion in 2024 revenue. That hardly seems like a business ready to shut its doors. On the bottom line, it expects earnings per share of $2.85. It trades at 8.7x this estimate. 

Operationally, excluding Paxlovid and Comirnaty, its revenues grew 14% in the third quarter. In the first nine months of 2024, it had six non-Covid drugs with revenues over $1 billion, with the Vyndaqel family of oncology drugs accounting for 10% of its non-Covid revenue, up 67% over a year ago. 

The Jan. 15/2027 $27 call had an ask price of $3.50, a downpayment of 11.5% on 100 shares. PFE has to appreciate by 17% over the next 26 months to be in the money, including the premium paid. Its ITM probability is very high at 46.70%. 

If you’re a value investor, PFE’s call is the play.