Shares of electric vehicle manufacturer Fisker (FSR) have lost 60 percent of their value in the past year. One trader sees a further drop ahead.
That’s based on the December 16 $10 puts. With 30 days until expiration, 12,024 contracts traded compared to a prior open interest of 196, for a 61-fold rise in volume on the trade. The buyer of the puts paid $1.88 to make the bearish bet.
Shares recently traded for about $8.50, meaning the options are about $1.50 in-the-money already. Fisker shares have recently had a strong bounce off their 52-week low of $6.41.
The EV manufacturer is still in its early stages. It’s burning through nearly $500 million annually, and only has $830 million in cash. Given today’s interest rate environment and the valuation investors are attaching to tech companies, they may have to raise more capital at an inopportune time.
Action to take: Interested investors should avoid shares for now. The market sentiment is negative towards early-stage companies, and there are safer long-side bets elsewhere right now in the tech/ EV space.
For traders, the puts are likely to gain in value. Being in-the-money already, however, they may likely only gain mid-double-digit returns from here. Traders willing to take on a bigger risk may want to buy the December $8 puts, which are priced far lower at about $0.67.
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.