Shares of fintech firm SoFi Technologies (SOFI) have been trading in a narrow range since the company’s IPO via a special purpose acquisition company, or SPAC. One trader sees the potential for a move higher in the coming weeks and months.
That’s based on a number of unusual options in the stock. The most interesting is the January $7.50 calls. With 210 days until expiration, over 8,300 contracts traded against an open interest of 228, for a 36-fold jump in volume.
The buyer of the calls paid about $13.75. As shares trade near $21.50, they’re essentially paying no premium for the $7.50 call, only the “moneyness” of the option.
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While shares moved higher ahead of the company’s merger, its high price of around $27 per share occurred at the start of the year as investors started diving into SPAC companies.
Action to take: This option has a long amount of time to play out, and is deep in-the-money. It should rise dollar for dollar with the price of shares less a slow time decay. Overall, that makes for a potential winner here, especially if shares head higher now that the company is trading on its own.
Investors may like shares, which are likely somewhat undervalued given SoFi’s 166 percent revenue growth in the past year. The company isn’t yet profitable, but a move to profitability could move shares higher.
That also makes these options interesting, although traders who don’t want to pay so much up front could find a higher-priced January option.
Disclosure: The author of this article has no position in the stock mentioned here, but may make trades in this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.