Online marketplace Etsy (ETSY) sank 16% last week following its latest earnings report. One trader sees a rebound for shares playing out in the months ahead.
That’s based on the January 2025 $65 calls. With 256 days until expiration, 4,447 contracts traded compared to a prior open interest of 134, for a 33-fold increase in volume on the trade. The buyer of the calls paid $8.10 to make the bullish bet.
Etsy shares traded around $58, meaning they would need to rise by about $7, or about 12% between now and the start of next year for the option to move in-the-money.
That’s well under the stock’s 52-week high of $102.81.
Etsy reported slowing revenue and earnings growth. As with other retailers, there’s been a notable slowdown in results this quarter as consumer spending has stalled out.
Even with the poor report, Etsy is still profitable, and trades at about 19 times forward earnings.
Action to take: Following its large gap lower, shares may try to trend higher in the coming weeks and months.
Investors may like shares as a speculation, but should keep a tight stop loss in place to avoid a further move down for shares.
For traders, the call options could be a big winner if shares rebound by the end of the year.
A post-earning push higher in the coming weeks can likely see the options return mid-double-digit returns without having to hold the option until expiration.
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 company mentioned in this article.