Shares of Virgin Galactic (SPCE) dropped heavily on Monday, as the company’s latest test flight triggered a failsafe. But at least one trader recognizes that rocket science is complex, and shares will recover.
That’s based on the January 8th 2021 $27.50 calls. Expiring 24 days, over 1,400 of the contracts traded hands, a 13-fold increase in volume over the prior open interest of 110. The trader paid about $2.65 for the options.
Shares fell to just under $27, making this an at-the-money trade. For the trader to profit at expiration, shares will need to trade just over $30 in the next month. Shares have traded as high as $35 just in the past week, so this looks like a solid rebound play.
- 25-Year-Old Prodigy Reveals Secret to Soaring Stocks
“Old school” folks might be skeptical of listening to financial advice from someone half their age, but this stock whiz beat out 15,000 experts to claim #1 title.
Action to take: While the failure of a test flight is unfortunate, the company has the operational capacity to move forward. And, like many other failed projects in aerospace and aeronautics, it’s as much a learning experience (if not more) than a successful flight.
Traders may be able to get mid-to-high double-digit returns on this trade in the next few days on a rebound in shares from Monday’s drop. That makes this option an attractive short-term trade. Those interested in the company over the longer-term may also want to use this pullback to look at longer-dated call options to buy as well.