IT services company Kyndryl Holdings (KD) is up 47 percent over the past year, about triple the move higher in the overall stock market. One trader sees a pullback in the coming weeks.
That’s based on the July 21 $13 puts. With 31 days until expiration, 3,957 contracts traded compared to a prior open interest of 101, for a 34-fold rise in volume on the trade. The buyer of the puts paid $0.35 to make the bearish bet.
Shares recently traded for about $13.50, so they would need to drop less than 5 percent in the next month for the option to move in-the-money.
Kyndryl Holdings has a 52-week high of $17.21, hit in February, and has been in an overall downtrend since then. The early stage company isn’t making money right now.
While the company has some debt on its balance sheet, there’s enough cash to make it through the next year without having to go to capital markets for more funding.
Action to take: Shares are likely to continue following their long-term downtrend in the coming weeks and months, so interested investors should look for a further pullback to the $11.50 range or lower.
For traders, the puts don’t have much time to play out, but are inexpensive enough to see mid-to-high double-digit gains on a steep enough drop for shares. Traders should look to take a quick profit here.
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.