Artificial intelligence software company C3.ai (AI) has nearly quadrupled since the start of the year. one trader sees a short-term pullback in the coming weeks.
That’s based on the September 15 $42.50 puts. With 44 days until expiration, 5,021 contracts traded compared to a prior open interest of 123, for a 33-fold rise in volume on the trade. The buyer of the calls paid $7.11 to make the bearish bet.
Shares recently traded for about $42, making this an at-the-money option. The strike price is on the high end of the stock’s trading range over the past month, which has run between $36 and $44.
C3.ai is an early stage company, and hasn’t earned a profit yet, even as it’s grown revenues to over $266 million.
Action to take: Shares have rallied heavily so far this year, and have stalled in recent weeks. They could see a further move lower and consolidate before making a longer-term move higher. Interested investors can likely buy shares under $40 in the coming weeks given the daily volatility in shares.
For traders, shares look ready for a moderate downturn. While the options carry a hefty premium, the September $42.50 puts could see mid-double-digit returns in the coming weeks on a big enough selloff for shares. Traders should look to take a quick profit on a big down day for shares.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.