Shares of apparel manufacturing company FIGS, Inc (FIGS) have slid about 75 percent in the past year. One trader sees further downside for the company in the months ahead.
That’s based on the October $7.50 puts. With 130 days until expiration, 5,202 contracts traded compared to a prior open interest of 152, for a 34-fold rise in volume on the trade. The buyer of the puts paid $1.18 to bet on a further downside in shares.
The stock last traded for about $8.15, so shares would need to drop about $0.75, or just under 10 percent, to move in-the-money. Shares are already close to their 52-week low of about $7.97.
In addition to losing money last year, earnings slid 22 percent, even as revenues rose 26 percent. Retailers are now reporting a surplus of some goods, including clothing, which is likely why the company will continue to struggle operationally in the coming months.
Action to take: The company’s ongoing losses and potentially weak sales in the months ahead are a reason to stay away from shares now. That could change in time, and the company is somewhat inexpensively priced compared to other firms, but it’s worth staying away for now.
For traders, betting on the short side is an attractive bet. The option can likely deliver mid-double-digit returns in the coming months, with plenty of time to exit the trade before expiration.
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.