3D printing company Desktop Metals (DM) have fallen on hard times in the past year, with shares losing over 60 percent of their value. One trader sees a further decline for shares in the months ahead.
That’s based on the August $2.50 puts. With 165 days until expiration, 14,163 contracts traded compared to a prior open interest of 305, for a 46-fold rise in volume on the trade. The buyer of the puts paid $0.75 to make the bearish bet.
Desktop Metals shares recently traded for about $2.05, making the option about $0.45 in-the-money. The strike price is still well over the stock’s 52-week low of $1.13.
The early-stage company is ramping up production, and is losing money in the process, with nearly $500 million in losses over the past year. however, revenues rose 85 percent to over $200 million, and the company has enough cash on hand to weather another year without having to issue more shares.
Action to take: Shares already jumped higher on their most recent earnings report thanks to better-than-expected revenues. It’s possible that shares may continue to trend higher from here, although there will likely be some more pullbacks along the way. Investors can likely buy again under $2.00 per share.
For traders, after the earnings beat and stock price jump, a partial pullback from that move higher is likely. That makes the August puts an attractive play. Traders can likely nab mid-double-digit gains, given that the option is already in-the-money.
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.