E-commerce platform company Shopify (SHOP) has soared nearly 60 percent in the past year. One trader sees a further rally ahead for shares in the next seven months.
That’s based on the March 2024 $70 calls. With 217 days until expiration, 11,583 contracts traded compared to a prior open interest of 171, for a 68-fold rise in volume on the trade. The buyer of the calls paid $4.90 to make the bullish bet.
Shares recently traded for about $56, so they would need to rise $14, or 25 percent, for the options to move in-the-money. That would also mark a return to the stock’s 52-week high, hit in mid-July before the recent pullback.
Shopify has grown revenues by 30 percent over the past year, although the company is not yet profitable.
Action to take: Shares likely still have more upside in the months ahead, and the stock has fallen so fast and so quickly that the stock looks ripe for a rebound.
Long-term investors may like shares here both for a rebound soon. As the company moves to profitability, its valuation can likely expand, offering the potential for far more upside than an oversold bounce in the months ahead.
For traders, the March 2024 calls are an inexpensive way to leverage a bounce higher in shares with more than half a year to play out.
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.