App software company Digital Turbine (APPS) has lost over half its share price in the past year. One trader sees a rebound in the weeks ahead.
That’s based on the August $12.50 calls. With 44 days until expiration, 4,387 contracts traded compared to a prior open interest of 115, for a 38-fold rise in volume on the trade. The buyer of the calls paid $0.30 to make the bullish bet.
Shares recently traded for about $9.25, so shares would need to rise $3.25, or over 35 percent, for the option to move in-the-money.
Digital Turbine has a 52-week high of $25, but a high closer to $15 over the past three months. Either way, shares would need to jump substantially higher for the option to move in-the-money.
The mobile platform for digital advertisers hasn’t been profitable over the past year, and revenues have slid by nearly a quarter.
Action to take: Shares have been hit hard and don’t seem to have found a long-term bottom yet. However, the stock has dropped enough that it could be oversold here and could bounce in the short-term. That could lead to a quick, low-double-digit gain in shares.
For traders, the August calls are aggressive, but could see high-double-digit or even low triple-digit gains in the weeks ahead on any move higher in shares. Look to take profits quickly given the potential for a further slide lower in the months ahead.
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 of the companies mentioned in this article.