Shares of search engine giant Alphabet (GOOGL) have shed nearly 20 percent of their value in the past year. One trader sees the potential for a further decline in shares in the next 14 months.
That’s based on the September 2023 $53 puts. With 416 days until expiration, 6,299 contracts traded compared to a prior open interest of 150, for a 42-fold rise in volume on the trade. The buyer of the pus paid $0.88 to make the bearish bet.
The stock is at a post-split price just under $108 right now, making a strike price of 53 a haircut of just over 50 percent for investors today. That’s also far under the split-adjusted 52-week low of about $102 per share.
While shares have taken a beating over the past year, the company is hugely profitable, and shares are now going for less than 20 times earnings. That’s a compelling valuation, especially as revenue rose by 23 percent in the last year.
Action to take: Shares look somewhat oversold here, and with the recent split, are affordable for investors to buy a few shares now. While the stock doesn’t pay a dividend, buyers can start buying now, and use any short-term drops in the months ahead to add to their stake.
For traders, the company is likely to see a few more down days in the weeks and months ahead. That means these put options could potentially deliver high-double or even low-triple digit profits, particularly with earnings coming up after the closing bell today.
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.