Halftime Report

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Halftime Report

Traders bet this stock will sparkle after earnings

Key Points
  • Traders are betting big on Signet Jewelers ahead of its Q1 earnings report on June 6.
  • On Monday bullish investors bought more than 5,000 calls at the June 44 strike price, according to trader Jon Najarian.
  • Shares of Signet are down 25% so far this year.

Signet Jewelers may have fallen more than 25% this year, but bullish investors are betting that the tide may be about to turn for the Bermuda-based company.

On Monday traders bought more than five thousand calls at the June 44 strike price, according to Investitute.com co-founder and "Halftime Report" trader Jon Najarian.

The company is set to report Q1 earnings on June 6th before the bell, so Najarian believes this action is due to traders betting the stock will pop following quarterly results.

According to FactSet estimates, analysts are expecting a loss of 9 cents a share on $1.4 billion in revenue.

Signet closed at $42.63 on Friday, so it will need to pop 3.21% to hit that key $44 level. These particular calls expire on June 15, which means that as long as the stock trades above $44 by then, the traders can exercise their right to buy the stock at a lower price, and collect a profit (minus their cost to purchase the option).

As more investors have wanted to get in on this trade, the cost per options contract has surged. Last week one contract cost $1.67, versus $2.22 today -- a 32.93% increase.

On Monday's "Halftime Report" Najarian also noted that traders might be particularly bullish ahead of Signet's report given that chief competitor Tiffany blew past Q1 analyst estimates.

Bulls spot diamond in the rough

Tiffany hit a new all-time high last Wednesday after beating top and bottom line expectations. It also raised its full-year outlook, and announced a $1 billion share repurchase program.

Jon Najarian owns Signet calls.