Shares of ecommerce platform Newegg Commerce (NEGG) traded in a narrow range for the past few months, before exploding more than 300 percent higher in recent sessions. One trader expects that move higher to continue in the next few days.
That’s based on the July 16 $30 calls. With 8 days until expiration, over 3,140 contracts traded against a prior open interest of 112 for a 28-fold jump in volume.
In recent sessions shares have jumped from around $10 to about $62. The $30 call represents a deep in-the-move option following shares moving over 100 percent higher on Wednesday amid multiple trading stops.
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The company completed a reverse merger with its parent company in late May, and has been providing a lottery for sold-out GPUs in recent days which may be attracting investor interest.
Action to take: The company was slightly profitable when it completed its reverse merger, and sported 70 percent revenue growth last year. The recent jump higher in shares could lead to a quick return on this call option, but traders might want to look for a pullback instead. The recent chart price is a clear parabolic move higher. Those tend to reverse heavily and give back the bulk of their gains in a short amount of time.
A trade like the November $10 puts, last going for about $1, might be a better way to play this current jump higher in shares as it comes back down to earth.
Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.