Shares of advertising agency Magnite (MGNI) have shed two-thirds of their value in the past year. One trader sees further downside going into the latter half of the year.
That’s based on the January 2023 $12.50 puts. With 212 days until expiration, 3,950 contracts traded compared to a prior open interest of 131, for a 30-fold rise in volume on the trade. The buyer of the puts paid $4.30 to get in.
Shares recently traded for just over $9.50, meaning the options are more than $3 per share in-the-money. The stock has a 52-week low of just over $8.50, a price the shares would have to drop to for the option to close with any value at expiration.
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While the company saw revenues soar 94 percent last year, the company didn’t turn a profit. And advertising has been dropping in recent weeks as companies have been cutting back amidst economic uncertainty.
Action to take: Shares likely have some more downside in the months ahead, so investors may want to hold off on buying shares for now. However, in the $7.50 range, it may be attractive to start accumulating a long-term position in shares.
For traders, the January $12.50 puts are well-priced. Trading in-the-money, their upside is somewhat limited, but a few big down days for shares in the coming weeks could lead to some quick double-digit gains.
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.