Electric vehicle manufacturer Fisker (FSR) is down 60 percent over the past year, as demand for new cars has slowed. One trader sees further downside in the weeks ahead.
That’s based on the December 15 $2 puts. With 24 days until expiration, 18,694 contracts traded compared to a prior open of 146, for a massive 128-fold rise in volume on the trade. The buyer of the puts paid $0.10 to make the bearish bet.
Shares recently traded just under $3, so would need to lose almost a third of their value for the options to move in-the-money. Fisker shares just hit a new 52-week low last week, even as the overall market continued to rally.
The EV manufacturer has also been struggling operationally. While revenues have finally started to look positive, Fisker lost over $400 million last year. If this rate continues, Fisker will run out of money in just over a year.
Action to take: Investors interested in the EV space should look elsewhere. If Fisker can’t improve its revenues, it may have to issue debt or sell shares, which would dilute existing shareholders.
For traders, the December $2 puts are aggressive, but could still see mid-double-digit gains in the weeks ahead. Traders may also want to use any short-term rally in shares to buy longer-dated put options to get past the seasonal strength of the next few weeks.
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.