Unusual Options Activity: Shopify (SHOP)

Commerce platform Shopify (SHOP) fell last week following earnings. As a result, shares are now trading flat over the past year. One trader is betting shares will rebound from the earnings drop in the months ahead.

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  • That’s based on the September $120 calls. With 129 days until expiration, 12,376 contracts traded compared to a prior open interest of 444, for a 28-fold rise in volume on the trade. The buyer of the calls paid $0.14 to make the bullish bet.

    Shopify shares recently traded for just under $60, so the stock would need to double for the options to move in-the-money. It would also mean a new 52-week high over the prior high of $91.57.

    Shopify has had a mixed year. While still unprofitable, earnings have grown by 24%. And Shopify has over $4 billion in net cash on its balance sheet, which puts them at low risk of bankruptcy now.

    Action to take: Shares may have a few more days around their current levels, but could see a bounce from here. Following the earnings drop. Shopify is well into oversold territory based on relative strength.

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  • For traders, the September $120 calls are aggressive, but are inexpensive enough that a strong bounce could see triple-digit gains.

    Traders willing to pay more for a trade closer to the money, such as the September $80 calls, trading for about $1.50, could see a lower percentage return but may find it easier to make money overall.

     

    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 company mentioned in this article.

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