Shares of social media company Pinterest (PINS) have been in a steady downtrend for the past year, shedding more than two-thirds of their value. One trader sees the potential for a rebound ahead.
That’s based on the March $25 call option. With 29 days until expiration, 12,053 contracts traded compared to an open interest of 621, for a 19-fold jump in volume. The buyer of the calls paid $1.89 to make the trade.
Shares recently went for just under $25, making this an at-the-money trade. Shares are well off their 52-week high of just under $90 per share.
While shares have collapsed, the company has grown revenue by 20 percent in the past year, has grown profit margins to 12 percent, and shares now trade at under 23 times forward earnings, their best valuation in years.
Action to take: Shares look like an interesting potential rebound play, particularly if the company can improve revenue and profit margins further. The stock is a long way from paying a dividend, however.
For traders, the March options look interesting, as shares could rally strongly in the coming weeks on a relief from the current market fears. Plus, with shares valued where they are, a move to the upside appears more likely than not. The March calls are an inexpensive rebound play, but traders could also look further out for a bigger rally in shares in the months ahead.
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.