Utility operator The AES Corporation (AES) is down 20% over the past year, with a significant drop just over the past two months. One trader sees shares continuing to decline in the weeks ahead.
That’s based on the December 20 $12 puts. With 28 days until expiration, 14,611 contracts traded compared to a prior open interest of 154, for a 95-fold rise in volume on the trade. The buyer of the puts paid $0.20 to make the bearish bet.
AES shares recently traded for about $13.30, meaning shares would need to decline by about $1.30, or nearly 10%, for the option to move in-the-money. Shares are also at a 52-week low, off from a peak of $22.21, or about 40% higher.
Operationally, AES has had a mixed year. Earnings are up 117%, but revenues are down by 4%. Many utility companies have seen a boost as interest in energy for AI products has been on the rise, but AES is not the best-positioned for that trend.
Action to take: With shares currently in a downtrend and setting new 52-week lows, interested investors should hold off for now. The selloff has pushed the AES’s dividend to over 5%, but it could move even higher as shares continue to decline.
For traders, the December 20 $12 puts are well positioned for the current steep decline in shares. Traders can likely see high double-digit returns given the low cost of the option.
Disclosure:
The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
