Unusual Options Activity: DropBox (DBX)

Shares of file-sharing company DropBox (DBX) have been rising steeply in recent sessions. While shares are nearing overbought levels on a technical basis, at least one trader sees the potential for a move higher.

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  • That’s based on the October $35 calls. Over 11,660 contracts traded a 24-fold rise in volume from the prior open interest of 493. The buyer of the calls paid about $1.11 to make the trade.

    With shares rallying to just under $30, it will take another 16 percent rally in shares for the option to move in the money over the next 122 days.

    Since going public in early 2019, shares rose to nearly $40 shortly after their IPO. But since then, shares have mostly traded in the low $20 or under range, and have only started to move meaningfully higher in the past few weeks.

    With shares at a 52-week high, there’s certainly a good chance the trend will continue, even if it takes a breather in the next few days as shares enter overbought territory.

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  • Action to take: Investors may like shares here, with an eye towards taking profits at or over $35.

    The October calls also look like a reasonable trade, as they can potentially deliver triple-digit returns in the coming weeks as shares trend higher. If shares have a down day or two in the next week, traders may even be able to get into the trade for under $1.00.

     

    Disclosure: The author of this article has no position 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.

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