Shares of financial analytics company Dun & Bradstreet (DNB) have been trending down steadily over the past year, before a brief spike higher in the past few weeks. One trader sees the longer-term downtrend continuing.
That’s based on the January $17.50 puts. With 99 days until expiration, over 4,220 contracts traded hands, a 35-fold rise in volume from the prior open interest of 120. The buyer of the puts paid $0.98 to make the trade.
With shares in the low $18 range, they’d need to fall less than 5 percent or $1 for the puts to move in-the-money. Over the past year, shares have steadily dropped about 30 percent, and with a 52-week low of $16.60, it’s likely the trade could move in-the-money.
The dropping share price is occurring as the company has been losing money, even though revenue has been trending up in the most recent quarter.
Action to take: The downtrend is clear here. Investors would want to wait for a meaningful change in share trend before investing in shares. Given the holding costs and margin requirements to short shares, investors would be wise to wait here, using a put option as a better and less expensive way to short.
Given the downtrend, these put options look attractive here. They can likely move higher, even if the rest of the stock market trades sideways or moves higher from here in the coming months.
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.