Shares of wireless communications equipment company BlackBerry (BB) have shed more than half their value in the last year amid a big drop in tech stocks. One trader sees a further decline.
That’s based on the June $4.00 puts. With 174 days until expiration, 4,255 contracts traded compared to a prior open interest of 151, for a 28-fold rise in volume on the trade. The buyer of the puts paid $0.82 to make the bet.
The stock recently traded at a new 52-week low just under $4, making this an at-the-money trade. That also puts shares down over two-thirds from their 52-week high of $9.67.
The company hasn’t made money in the past year, and revenues are down 8 percent as well, which could continue to weigh on the company’s share price in the quarters ahead.
Action to take: Patient investors might be able to buy shares a bit lower in the coming months. For now, it’s best to let the downtrend continue to play out. The company’s patents and placement in wireless communication technology for self-driving cars could lead to a bigger value in the years ahead, even if shares aren’t a buy right away.
For traders, the put options are well positioned. As an at-the-money trade, a triple-digit return isn’t likely, but traders can likely nab mid-double-digit returns in the months ahead.
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.