Ares Capital Corporation (ARCC) is an investment company investing in middle-market companies here in the U.S. The stock is currently trading around $17.45 in a 52 week range of $16.15-$18.63. The stock has been underperforming the market this year with shares falling 1.67% year to date. Options traders seem to think this trend will reverse as orders hitting the tape today have been very bullish. Earlier today a trader bought 2,500 of the ARCC Apr 18 Calls for $0.10. Over 6,400 contracts have now traded on that line against open interest of only 130. This is a very bullish trade that represents volume nearly 29 times the average daily volume in ARCC. The stock has rallied from the day’s lows after this trade took place. Although the stock is trading below the cloud we believe this order flow signals for a good risk to reward set up in ARCC.
Trade: Buying the ARCC May 18 Calls for $0.15.
Risk: $15 per 1 lot
Reward: Unlimited
Breakeven: $18.15