Shares of online board Pinterest (PINS) have shed 75 percent of their value in the past year. One trader sees the chance for a further decline in the coming few days.
That’s based on the July 1 $15 puts. With 8 days until expiration, 19,778 contracts traded compared to a prior open interest of 116, for a 171-fold rise in volume on the trade. The buyer of the puts paid $0.10 to get into the trade.
The stock recently traded for around $18, so shares would need to slide about $3, or over 15 percent in the next week for the option to move in-the-money. It would also mark a new 52-week low for shares, which saw their lowest price at $16.14.
The company hasn’t been profitable in the past year, but revenues have risen 19 percent. And thanks to the drop in shares, the stock has dropped from 188 times earnings to about 21 times forward earnings.
Action to take: Shares are likely to continue declining given the current market downturn and concern over valuations in anything tech-related. So investors may want to wait until market sentiment improve before considering going long on shares.
For traders, the puts don’t have much time to play out, but traders can likely make a quick double-digit gain on the position to take advantage of any short-term drop in markets.
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.