Shares of software intelligence company Dynatrace (DT) have lost nearly one third of their value in the past few weeks. However, one trader sees the chance for a rebound ahead in shares.
That’s based on the February $55 calls. With 39 days until expiration, 36,127 contracts traded against a prior open interest of 149, for a 242-fold rise in volume. The buyer of the calls paid $3.90 to make the trade.
With shares just under $54, they would need to rise just under 2 percent for the options to move in-the-money.
Even with the recent pullback, shares are still up over 30 percent in the past year, and revenues and earnings are both up by mid-double-digit levels.
Action to take: Shares have the potential to rebound here, and with a 52-week high closer to $80, there’s a lot of upside as soon as the sentiment in shares switches back to positive.
For traders, the option looks attractive as an inexpensive play on a rebound compared to options. With just under six weeks for the trade to play out, however, shares will need to rebound quickly for the option to pay off. If it does, traders could make high-double-digit returns. If not, they could end up seeing the option lose value, so traders should stay nimble and look for a quick exit.
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.