Trader bets space tourism company’s shares will go to the moon this year.
January 2021 calls with a $25 strike on Virgin Galactic Holdings (SPEC) saw a 12-fold rise in volume, going from 295 contracts to over 10,300.
The bet, expiring in 358 days, is that shares will hit at least $28.25, adjusting for the $3.25 that the option buyer paid in premiums.
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Warren Buffett said, "Price is what you pay... value is what you get."
The best investor in the world knows the only way to prosper (especially in markets like these)... is to invest in VALUE.
But this $2 stock could be the last value play in the market today.
The $25 strike price is currently about 35 percent higher than where shares currently trade near $18.50. For the buyer to profit at expiration, shares need to rally another 53 percent from here.
Virgin Galactic Holdings is the publicly-traded vehicle for billionaire Richard Branson’s spaceflight tourism company. Shares have nearly already tripled since dropping to $7 in December from their IPO price of $10.
Action to take: If you want a bet that could trounce the market in the next few weeks, months, or even the entire year, this is it.
It’s a long-term options play on a high-flying company. Even with the recent surge in shares, the total valuation of the company is just $3.6 billion, so there’s definitely room to ride.
And with a long-dated options trade like this, traders don’t need to wait until expiration to take a profit.
As the company is nowhere near fulfilling its core vision of bringing spaceflight tourism to fruition this year, we prefer just making a speculative bet on the shares heading higher with a call option trade.
Interested investors may want to buy in now, and hope for a pullback from some later high to add to their stake.