Unusual Options Activity: Digital Realty Trust (DLR)

Data center REIT Digital Realty Trust (DLR) is up 36% over the past year, about in-line with the overall stock market, before accounting for its dividend. One trader sees shares pulling back over the coming weeks.

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  • That’s based on the December 20 $170 puts. With 39 days until expiration, 8,417 contracts traded compared to a prior open interest of 191, for a 44-fold rise in volume on the trade. The buyer of the puts paid $2.10 to make the bearish bet.

    Digital Realty last traded for about $178, meaning shares would need to drop by $8, or about 4.5%, for the option to move in-the-money.

    Shares recently spiked to a 52-week high of $193.88 before they started to pull back. Filling the price gap would take the stock back to the $165 range.

    Digital Realty is seen on a play on the growing demand for data centers to power AI. But the REIT’s performance has been sluggish, with revenues up by just 2% over the past year.

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  • Action to take: While there’s a long-term uptrend, in the short-term the trend has been lower. Interested buyers can likely pick up shares in the mid $160 range, at the gap fill.

    As a REIT, Digital Realty is structured to pay a 2.8% dividend.

    For traders, the December 20 $170 puts are well positioned for shares to continue their short-term downtrend and look to fill the prior price gap higher. Traders can likely see mid-to-high double-digit returns.

     

    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.

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