Shares of Peloton Interactive (PTON) dropped on Tuesday following news of a voluntary recall for the company’s treadmill products. At least one trader sees a recovery in shares in the upcoming months.
That’s based on the September $95 calls. Over 6,270 contracts traded against an open interest of 101, for a 62-fold rise in volume. The option has 133 days until expiration. The buyer of the calls paid about $8.50 to make the trade.
Shares slid double-digits to under $83 on the recall news. A move back to $95 represents about a 15 percent move higher in shares from here. The price of shares have already been in a decline since December.
- 25-Year-Old Prodigy Reveals Secret to Soaring Stocks
“Old school” folks might be skeptical of listening to financial advice from someone
half their age, but this stock whiz beat out 15,000 experts to claim #1 title.
Action to take: A short-term move higher appears likely in the coming days given the severity of this one-day drop. However, the drop in shares also caused a death cross to occur, where the stock’s 50-day moving average crosses over the 200-day moving average.
With those factors in mind, traders may want to buy the call, grab a profit on a day or two higher on a move, then wait to see if shares start a new uptrend rather than a bounce higher before looking into further trades.
It’s possible that shares continue their longer-term downtrend, but a few days of a share rally could lead to a better entry point for a downside trade.
Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.