Payment technology company Global Payments Inc (GPN) is down 11% over the past year. One trader sees further downside in the weeks ahead.
That’s based on the November 15 $85 puts. With 42 days until expiration, 6,093 contracts traded compared to a prior open interest of 190, for a 32-fold rise in volume on the trade. The buyer of the puts paid $1.20 to make the bearish bet.
Global Payments shares recently traded for about $97.50, so the stock would need to drop by $12.50, or about 13%, for the option to move in-the-money. The strike price is well under the stock’s 52-week low of $91.60.
Operationally, the company has held up rather well. Earnings are up 37% over the past year, even though revenues are up by just 5%, indicating the company is improving its back-end features.
GPN also has a 14% profit margin, on the high side for payment services, and shares trade at 8 times forward earnings.
Action to take: Investors may like shares as a contrarian trade here. There’s a lot to like about the company operationally, although the share price has traded weakly over the past few months. GPN also offers a 1% dividend.
Traders can still bet on further downside in the immediate short-term. The November $85 puts could see mid-double-digit returns from a further selloff in shares here.
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.