Unusual Options Activity: Wayfair (W)

Shares of internet retailer Wayfair (W) are down 60 percent over the past year. One trader sees that trend continuing over the next few months.

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  • That’s based on the May $50 puts. With 105 days until expiration, 14,221 contracts traded compared to a prior open interest of 416, for a 34-fold rise in volume on the trade. The buyer of the puts paid $5.05 to make the bearish bet.

    Shares recently traded for about $66, so they’d need to fall about 25 percent in the coming months for the option to move in the money. That’s a possible move, given that the stock has a 52-week low just over $28.

    Wayfair has lost money over the past year, and has seen revenues drop by 10 percent. Despite earning revenues over $12 billion, the company managed to lose over $1 billion.

    Action to take: Investors interested in the retail space have a pick of better options, such as big box stores that have fairly consistent profitability. Shares of Wayfair have jumped higher in recent weeks, but look poised for a drop ahead.

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  • For traders, the May $50 puts look attractive. The stock gapped higher at the $50 mark in mid-January, so that’s a strong price point for shares to move back to in the coming months. Traders can likely nab high double-digit returns, depending on the speed and severity of the pullback.


    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.