Exercise technology company Peloton Interactive (PTON) is down 2% over the past year, with shares coming off extreme lows from earlier in the year. One trader sees the stock surging higher into next spring.
That’s based on the April $7 calls. With 197 days until expiration, 13,239 contracts traded compared to a prior open interest of 209, for a 63-fold rise in volume on the trade. The buyer of the calls paid $0.67 to make the bullish bet.
Peloton shares recently traded for about $4.80, meaning shares need to rise by about $2.20, or 48%, for the option to move in-the-money. The strike price is right near the stock’s 52-week high of $7.24.
Shares of Peloton may continue to struggle. The company remains deeply unprofitable, but they are working on restructuring the company to move to profitability.
Revenues are up 0.2% over the past year, but Peloton still lost $551 million over the past year.
Action to take: Given Peloton’s shaky operational history, investors may want to look at shares as a speculation. With the stock in an uptrend, momentum investors may like shares here for further upside in the months ahead.
For traders, the April $7 calls are inexpensive and have plenty of time to play out before expiration. From here, a further rally in shares could mean high double-digit returns or better.
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 company mentioned in this article.