Unusual Options Activity: Geo Group (GEO)

For-profit prison company Geo Group (GEO) has seen shares trend down in recent weeks. The Biden administration is looking to get out of for-profit prison contracts, suggesting weakness ahead. But one trader sees a bounce first, if not a reversal higher.

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  • That’s based on the April $9 calls. With 49 days until expiration and shares just under $8, the stock price would need to move about 12 percent higher for the trade to move in-the-money.

    Over 12,950 contracts traded, a 43-fold rise in volume from the prior open interest near 302. The trader paid about $0.65 to make the trade.

    Shares of the company are already down 53 percent in the past year. The company has seen earnings drop by nearly 70 percent and revenue slide by 7 percent in the same timeframe.

    Action to take: Shares are certainly oversold enough to get a short-term bounce higher from here. That makes this short-term options trade attractive. Traders could likely see a mid-to-high double-digit move higher from here.

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  • Longer-term, traders would want to look at a put option to trade the downtrend in shares. A trade such as the September $7 puts, currently trading for around $1.40, could possibly be bought closer to $1 even after a slight bounce higher in shares off of oversold levels.