Payment management company BILL Holdings (BILL) is up about 14 percent so far this year. However, one trader sees a pullback in the months ahead.
That’s based on the November $120 puts. With 122 days until expiration, 22,046 contracts traded compared to a prior open interest of 101, for a 218-fold rise in volume on the trade. The buyer of the puts paid $14.60 to make the bearish bet.
Shares recently went for about $125, so they would need to drop $5, or 4 percent, for the options to move in-the-money. With a 52-week low of $68.30, the strike price on the option is quite reasonable.
Revenues are up 63 percent over the past year, but the early stage company is still far from making a profit.
Action to take: BILL Holdings has solid long-term potential, but shares look a bit overbought in the short-term. Investors should look for a short-term pullback before buying shares, perhaps to the $110-115 range. The company is a long ways away from paying a dividend.
For traders, the November puts are well positioned for a short-term pullback. While expensive, they can likely deliver mid-double-digit gains on a small pullback in the coming weeks. There may even be a big drop around mid-August, when BILL next reports earnings.
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.