Autonomous driving technology company Aurora Innovation (AUR) is up 71% over the past year. One trader sees shares pulling back in the coming weeks.
That’s based on the August 16 $4 puts. With 28 days until expiration, 20,620 contracts traded compared to a prior open interest of 370, for a 56-fold rise in volume on the trade. The buyer of the puts paid $0.36 to make the bearish bet.
Aurora shares recently traded for about $4.30, meaning that shares would need to drop by about 7% in order for the option to move in-the-money. Aurora recently jumped to a new 52-week high of $5.24 before pulling back.
Aurora is still an early-stage company and isn’t profitable yet. They burned through about $765 million in the past 12 months.
Meanwhile, Aurora has $1.1 billion in cash on its balance sheet still, but without revenue coming in could have to issue cash or more shares if the situation doesn’t turn around.
Action to take: Shares are trending higher, but the recent spike higher may mean shares consolidate over the next few weeks. Interested investors can likely buy shares at $4 or under in the coming weeks on such a consolidation.
For traders, the August $4 puts likely have some upside left, and given the low cost of the options, could see high double-digit returns. With little time on the trade, traders should take quick profits.
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.