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.
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.
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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.
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.