Shares of social media company Meta Platforms (META) sank to a new 52-week low after earnings last week. One trader sees a further decline over the next year.
That’s based on the January 2024 $25 put. With 442 days until expiration, 2,291 contracts traded compared to a prior open interest of 162, for a 14-fold rise in volume on the trade. The buyer of the puts paid $0.59 to make the trade.
Shares recently traded just over $95, so the stock would need to decline about $70, or nearly 75 percent, for the option to move in-the-money. Given the stock’s 71 percent dop in the past year, such a move seems just barely in the realm of possibility.
The social media platform has seen its drop since rebranding last year to focus on the Metaverse, rather than on the core business of Facebook, the dominant social media platform that’s getting the bulk of ad space in the sector right now.
Action to take: With shares gapping lower after earnings, it’s more likely that shares rally in the next year and change rather than lose another 75 percent.
It’s clear the company has tried to do too much, too fast with its transformation. Shares look interesting as a rebound play, and look worth accumulating under $100 for a rebound in the coming months.
For traders, the January puts are inexpensive, and may deliver some modest gains in the coming weeks on fears of a market decline. But given how oversold shares are, traders may want to look for quick, mid-double-digit profits on the short side before going long.
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.