Unusual Options Activity: Shopify (SHOP)

Shares of online retailer Shopify (SHOP) have shed nearly 80 percent of their value in the past year as tech stock valuations have dropped. One trader sees shares potentially stabilizing and moving higher from here.

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  • That’s based on the November $25 calls. With 112 days until expiration, 25,039 contracts traded compared to a prior open interest of 115, for a staggering 218-fold jump in volume on the trade. The buyer of the calls paid $12.35 to get in.

    The stock recently traded just over $35, meaning the options are already about $10.00 in-the-money. A further rise in shares should see an increase in the price of the option as well. The stock has a 52-week high just over $176.

    The online retailer is coming off a strong year, with revenue up nearly 22 percent. While the company isn’t yet profitable, Shopify has over $7.2 billion in cash on its balance sheet. If it can last through a drop in consumer spending online in the next few quarters, the company can likely survive and thrive.

    Action to take: Shares could be a contrary buy here. Buyers may want to consider picking up a small stake now, and look to add on a major down day in shares.

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  • For traders, the call option is interesting as it could deliver mid-to-high double-digit returns. If shares hold up around their current price, there’s only a little downside to the option, making for an interesting risk/reward setup going into the fall.


    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.