Digital lending platform SoFi Technologies (SOFI) has been on a tear, with shares up over 85% in the past year. One trader sees the stock pulling back over the coming weeks.
That’s based on the March $11.50 puts. With 15 days until expiration, 64,248 contracts traded compared to a prior open interest of 302, for a giant 213-fold jump in volume on the trade. The buyer of the puts paid $0.24 to make the bearish bet.
SoFi shares recently traded for about $13.50, so shares would need to drop by $2, or nearly 15%, for the options to move in-the-money. The strike price is still well over SoFi’s 52-week low of $6.01.
Operationally, SoFi has had a strong year. Earnings have surged by nearly 600% and revenues are up by over 20%, even in a challenging lending environment as interest rates stay high.
However, if these growth trends can continue, shares may be able to continue their longer-term trend higher.
Action to take: Shares are currently in a downtrend, so interested investors may want to wait until that trend fades out and a new uptrend starts before buying. SoFi shares trade at about 42 times forward earnings, nearly double the valuation of the stock market right now.
For traders, with a downtrend still underway, the March $11.50 puts are an inexpensive trade that could see high double-digit returns or better in the coming weeks. Traders should look to take quick profits on a big down day for shares.
Disclosure: The author of this article has no position in the company mentioned here, but may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.