Online gaming company Roblox (RBLX) has lost over a third of its value in the past year, and shares are near a 52-week low. One trader sees a bounce ahead in the coming months.
That’s based on the January 2024 $37.50 calls. With 147 days until expiration, 19,708 contracts traded compared to a prior open interest of 615, for a 32-fold rise in volume on the trade. The buyer of the calls paid $1.14 to make the bullish bet.
Shares recently traded near $26.50, so they would need to rise about $11, or about 42 percent, for the option to move in-the-money. That’s still well under the stocks’ 52-week high of $47.67.
Although revenues are up 15 percent over the past year, the company continue to bleed money. Roblox has lost over $1 billion in the past 12 months. While the company still has ample cash, if they continue to post these kinds of losses, shares may continue to languish.
Action to take: In the short term, shares are deeply oversold and could see a strong rebound in the coming weeks. Long-term investors may want to wait until the company has a clear path to profitability before buying.
For traders, the January calls are an inexpensive way to play a bounce higher in the coming weeks. The option is cheap enough that a short-term rally could lead to high double-digit returns or better.
Traders will likely want to take quick profits on such a jump higher, rather than hold the option until expiration.
Disclosure: The author of this article has no position in the company mentioned here, and does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.