Shares of exercise technology company Peloton Interactive (PTON) have shed over 75 percent of their value in the past year. with expectations for shares low, one trader is betting that the selloff is largely over.
That’s based on the January 2024 $35 calls. With 749 days until expiration, over 2,769 contracts traded compared to an open interest of 123, for a 23-fold rise in volume. The buyer of the calls paid $14.70 to make the trade.
Shares are currently right around $35, making this an at-the-money trade. The option could rise dollar-for-dollar with any move higher in shares. And with just over two years until expiration, this is one trade that could lead to big returns for relatively low risk.
The company has shed its price heavily on a number of production and recall issues, as well as the end to the hard lockdown era of the pandemic, which led to a drop in shares just as quickly as they rallied last year.
Action to take: The dropping share price and a slight gain in revenue over the past year are making shares trade at their best valuation since going public. Shares are certainly due for an oversold rally going into the next year.
For traders, the January 2024 options have a long time to play out, but could deliver triple-digit returns in under a year if shares have a strong enough rebound in early 2022.
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.