Shares of payment company Bill.com Holdings (BILL) are down nearly 60 percent over the past year amid a slowdown in online payment processing. One trader sees a further decline ahead.
That’s based on the February $120 puts. With 50 days until expiration, 10,116 contracts traded compared to a prior open interest of 194, for a 52-fold rise in volume on the trade. The buyer of the puts paid $23.65 to make the bearish bet.
Shares recently traded for about $103, leaving the option about $17 in-the-money already. The stock hit a 52-week low just under $90 per share back in May before moving higher, although that rally has petered out in the past few months.
Action to take: Shares are clearly in a downtrend, which favors avoiding shares for now. With the company losing money and trading at 189 times forward estimated earnings, more downside looks likely in the months ahead. So the stock should be avoided for now.
For traders, any put option trade looks attractive based on the company’s fundamentals and price action right now. The February $120 puts can likely deliver mid-double-digit gains in the coming weeks.
Traders with less capital can consider a less expensive trade like the February $75 puts for about $3.30, which can likely deliver bigger gains, but may not move in-the-money.
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.