Fuel cell energy company Ballard Power Systems (BLDP) saw shares rally to a speculative high back in February over $40, only to slide lower. One trader sees the potential for an even further drop in shares, despite a rally in recent sessions.
That’s based on the June 18 $13 puts. With 23 days left to trade, over 46,524 contracts traded against a prior open interest of 104, for a staggering 447-fold rise in volume.
The buyer of the puts paid about $0.10 for each contract. With shares around $16, the option will move in-the-money on another 20 percent decline in shares.
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Even with the massive drop, shares are still up 52 percent over the past year. As an early-stage company, the firm is not yet profitable.
While the trend is heavily negative and tech is still looking for market favor, the company has over $1 billion in cash and insiders own nearly 20 percent of the company.
Action to take: For now, this put option is an inexpensive play that could offer triple-digit returns. Shares may eventually turn around in time, but for the next few weeks, early-stage tech companies are still likely to deliver traders profits on the downside.
Traders will likely need to look for a technical turnaround in shares before it’s safe to go long on this name.
Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.