Fuel cell developer Plug Power (PLUG) is down over 70 percent in the past year as EV related stocks have fallen out of favor. One trader sees a further decline in the next six months.
That’s based on the March 2024 $5 puts. With 199 days until expiration, 5,003 contracts traded compared to a prior open interest of 239, for a 21-fold rise in volume on the trade. The buyer of the puts paid $0.35 to make the bearish bet.
Plug Power shares recently traded right around $8, so they would need to fall by $3, or about 38 percent, for the option to move in-the-money. It would also suggest that shares move below their prior 52-week low of $7.39.
Plug has managed to increase its revenues by 72 percent over the past year, but the company has burned through over $800 million in cash at the same time, resulting in a big loss.
That looks likely to narrow somewhat, but the company could burn through the cash on its balance sheet in the coming year or two.
Action to take: Shares look set to continue lower, potentially even setting new 52-week lows in the weeks ahead. Interested investors should wait for signs of a stronger demand for the EV market before getting in.
For traders, the March puts are inexpensive, and could see triple-digit returns before expiration on a move lower in shares. In an already shaky market, that makes for a potentially strong trade.
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.