Covanta Holding Corporation is an operator of systems that convert waste to energy in addition to other waste disposal and renewable energy businesses. The company’s stock is currently trading around $17.20 in a 52 week range of $16.70-$21.89. CVA has been lagging the market this year as shares have fallen over 6% year to date. Despite the recent fall in the stock we have seen a large amount of bullish order flow in CVA. Early in today’s trading session we saw a trader buy 25,000 of the CVA Jun 2015 15-22.5 call spreads for $2.60. This block represents volume 21.2 times average daily option volume in CVA and indicates this trader believes the stock will trade above $22.50 on June expiration. We believe that this order is an extremely bullish signal and a good opportunity for a long term trade. The Jun 25 calls are currently trading at $0.10-$0.15 so rather than selling them against the 15 calls we believe it is better to leave our profit potential uncapped.
Trade: Buying the CVA Jun 2015 15 Calls for $2.75
Risk: $275 per 1 lot
Reward: Unlimited
Breakeven: $17.75
