Shares of battery technology company QuantumScape (QS) have lost over 40 percent of their value in the past year, although shares have recently bounced more than 50 percent higher off their lows. One trader sees a further decline ahead.
That’s based on the March $9 puts. With 44 days until expiration, 13,951 contracts traded compared to a prior open interest of 259, for a 54-fold rise in volume on the trade. The buyer of the puts paid $1.42.
Shares recently traded for about $8.70, making the option about $0.30 in-the-money already. Shares have a 52-week low of $5.11, so a drop from here could lead to a big move higher for the put options.
QuantumScape went public a few years back to capitalize on the interest in electric vehicles and the increased need for rechargeable batteries. The early stage company has yet to reach commercial production, and has been burning through cash at a rapid rate.
Action to take: Shares have jumped higher in recent weeks with the rest of the overall market, and may be prone to a large decline on the next market leg downward. Interested investors can likely get a better price on shares on a pullback in the coming months.
For traders, the March puts look like an inexpensive way to play the oversold bounce in QS shares, as well as profit from a potential market decline in the coming weeks. Traders can likely log mid-double-digit gains.
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.