Shares of global money center bank Deutsche Bank (DB) are down about 15 percent over the past year. One trader sees a further decline in the months ahead.
That’s based on the February 2023 $10 puts. With 57 days until expiration, 9,298 contracts traded compared to a prior open interest of 149, for a 62-fold rise in volume on the trade. The buyer of the puts paid $0.32 to make the downside bet.
Shares recently traded for just over $11, so the stock would need to drop over 10 percent for the options to move in-the-money. The $10 strike price is till well under the 52-week low of $7.24 per share.
Revenues have been flat at the bank over the past year, but earnings are up about 122 percent this year. However, liquidity concerns and a slowing economy in Europe have led to some big move in the bank’s shares up and down.
Action to take: Shares recently had a large move higher, and look on track to give back some of those recent gains.
However, with so much skepticism about the bank’s prospects, shares are attractively valued at just over 5 times earnings and at less than one-third their book value. Investors might want to look at a short-term dip as a buying opportunity.
For traders, a short-term downtrend looks likely. That could cause these put options to rise by high double-digits in the weeks 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.