Modular nuclear reactor designer and manufacturer NuScale Power (SMR) is up 210% over the past year. One trader sees shares pulling back in the weeks ahead.
That’s based on the June 20 $18 puts. The options have 35 days until expiration, and 8,319 contracts just traded compared to a prior open interest of 203, for a 41-fold rise in volume on the trade. The buyer of the puts paid $0.60 to make the bearish bet.
NuScale Power shares recently traded near $23, and are up nearly 40% in the past week as tech stocks have surged and on strong earnings.
Shares aren’t quite back to their 52-week high of $32.30, but have run up to overbought levels in the past few trading sessions.
Operationally, NuScale is an early-stage company that isn’t profitable yet, having lost $130 million over the past 12 months. But the company is ramping up production, and should see a higher return as sales growth soars.
Action to take: Long-term investors may want to accumulate shares under $20, allowing for a modest pullback from current prices. That can take advantage of the stock’s volatility, and NuScale’s long-term prospects.
For traders, the June 20 $18 puts play well to shares being overbought in the short-term. The trade has a bit of premium in it, but could still see mid-to-high double-digit returns. If shares get back to the high teens, traders could look into buying call options for playing the next swing higher.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
