Unusual Option Activity: Shopify (SHOP)

Commerce platform Shopify (SHOP) rose over 120 percent in 2023, fueled in strong part by the year-end rally. One trader is betting shares will pull back in the coming weeks following their major move.

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  • That’s based on the February 2 $64 puts. With 28 days until expiration, 8,931 contracts traded compared to a prior open interest of 203, for a 44-fold rise in volume on the trade. The buyer of the puts paid $0.60 to make the bearish bet.

    Shopify recently traded for about $74, so shares would need to drop about $10, or nearly 15 percent, for the option to move in-the-money.

    Shares were recently trading near their 52-week high of $79.99 at the end of the year before trending lower.

    While shares more than doubled over the last year, revenues only grew by 25 percent. And Shopify is still unprofitable, so it trades at a hefty 76 times earnings.

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  • Action to take: Shares are overbought in the short-term and are due for a pullback. Tuesday’s 5 percent drop on no news indicates a bit more of a drop ahead in the coming weeks. Interested investors should look for shares to get some price support before buying.

    For traders, the February $64 puts could see high-double-digit returns in the weeks ahead, depending on how much Shopify declines from its overbought levels in the coming weeks.


    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 companies mentioned in this article.

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