Hilton Gets Unusual Options Activity Just In Time for Super Bowl Weekend

Super Bowl LIX (59) kicks off at 6:30 EST in New Orleans on Sunday evening. 

As a Washington Commanders fan, I’m torn. On the one hand, we Washington fans loathe the Eagles. On the other hand, the NFC is our division, so I guess I should cheer for one of our division rivals for good karma. However, I’m a huge Andy Reid fan as coaches go--once upon a time, he coached his opponents to many a victory--so there’s an argument to be made for Kansas City. 

Since I don’t have a dog in this fight, I’ll hope for a good game with minimal referee interference. One can hope, can’t they? Regardless, enjoy the game.

In yesterday’s unusual options trading, Hilton Hotels (HLT) had the highest Vol/OI ratio at 153.53. It was one of three stocks with a Vol/OI ratio over 100. 

 

Hilton stock has been on a run in recent years. It's up more than 12% in 2025, over 41% in the past 12 months, and $139% over the past five years.

Despite the role it’s been on, which would put pressure on valuations, I like the Hilton $250 call from above. Here’s why. 

Have an excellent weekend!

Why I Like Hilton

Hilton reported its Q4 2024 results yesterday. They were more than acceptable. HLT stock gained 8.4% on the news. 

The hotel operator’s fourth-quarter results included $2.78 billion in revenue, which was in line with analyst estimates and 6.7% higher than Q4 2023. On the bottom line, its earnings per share were $1.76, eight cents higher than Wall Street expectations and 5% higher than a year ago. 

Its guidance for 2025 included adjusted EPS of $7.77 at the midpoint, 3% below the consensus but 9% higher than the $7.12 a share it earned in 2024. 

A significant metric with global hotel operators is their pipeline of new rooms in development and those put into service. In 2024, it opened nearly 100,000 rooms worldwide, the biggest annual increase in Hilton history. It also recorded the most room development deals (154,000 rooms). 

CEO Chris Nassetta discussed its expansion plans in the Q4 2024 analyst call.

“Even with record openings, our system-wide pipeline grew 8% year over year to total approximately 500,000 rooms at year-end. We signed 154,000 rooms in the year, up 18% and representing our biggest year of signings to date … Construction starts for the year remained strong, the highest in our history, increasing 10% year over year across all regions. Excluding acquisitions and partnerships with meaningful growth, we finished the year with nearly a quarter million rooms under construction, which is more than any other hotel company.”

The most optimistic aspect of this expansion is that it’s coming at a time when interest rates are still relatively high, restricting the amount of capital available to build even more hotels. The CEO said rates should lower over the next 12-24 months, leading to greater expansion.

With the number of hotels coming online in 2025 and beyond, annual system-wide RevPAR growth of 2.7% is more than adequate to keep the top and bottom lines moving higher. 

Another thing to like about Hilton is its shareholder-friendly capital allocation. In 2024, it returned $3 billion to shareholders through dividends and share repurchases, and it plans to increase that by 10% in 2025. 

Over the past three years, Hilton has returned $7.32 billion to shareholders. In 2024, its share repurchase program had $4.4 billion left. Hilton will likely add another $3.5 billion in November, as it did this past November. 

The last thing to like about Hilton is that Bill Ackman’s hedge fund, Pershing Square Capital Management, owns 3% of the company, a stake worth nearly $2 billion. He has owned HLT stock since Q4 2018. It is Pershing Square’s second-largest holding, behind only Brookfield Corp. (BN).  

Why I Like Hilton Stock

 Hilton celebrated its 11th year as a public company in December. On Dec. 11, 2013, the company went public, selling $2.34 billion in stock at $20.

It valued the company at a $19.7 billion market cap. A little more than a decade later, it’s 3.4x higher. Hilton had $12.67 billion in long-term debt when it went public, 47.7% of its total assets. As of Sept. 3o, it was $10.50 billion, or 63.9% of assets.

That might seem like the balance sheet got worse, not better; however, in January 2017, it spun off Park Hotels & Resorts (PK), its hotel REIT, and Hilton Grand Vacations (HGV), its timeshare and vacation ownership business. 

Hilton Shareholders received one share of PK for every five shares held in the parent and one share of HGV for every 10 shares in the parent. 

HLT stock has gained 497% since its IPO and 371% since the three-way split on Jan. 3, 2017. At the same time, HGV is up 61%, while PK has lost 55% of its value.  

So, if you owned 100 HLT shares at the split, their value was $5,747. If you kept your shares from PK and HGV, their value would be $27,791, a 15.4% CAGR. 

If you hold Hilton for the long haul and buy more during corrections--it has had three significant setbacks since its IPO (41% in 2015/16, 49% in early 2020, and 27% in 2022--you should do well. 

Why I like the Hilton Call

The ask price of $30.80 is 11.4% of yesterday’s closing price of $270.39. That’s not unreasonable leverage. The call expires in 133 days, a little less than five months from now. 

Your breakeven at expiration is $280.80, $10.41 (3.8%) higher than where it’s currently trading. That’s not a big move for nearly half a year. More importantly, the 0.75942 delta means you can double your money by selling the call before June if it appreciates by $40.56 (15%). 

So, if it did appreciate by 15% by the end of May, let’s say you have two options: First, sell the call for a $3,080 profit, or wait 2o days and exercise your right to buy 100 shares at $250, good for a $30.15 gain [$270.39 share price + $40.56 appreciation - $30.80 ask price] and you can hang on to the shares indefinitely. 

The one thing to be concerned about with Hilton stock is whether the Trump trade wars will reduce hotel stays abroad and in the U.S. by Canadians and citizens from other regions (Middle East, China, Europe, Panama) boycotting American hotel chains. 

Hilton generates approximately 78% of its revenue in the U.S. and 22% internationally, so if business and leisure travelers stop visiting the U.S. in protest, that could affect future revenues. 

It isn’t a deal breaker but something to consider when investing in HLT.