Electric vehicle manufacturer Lucid Group (LCID) is down 20% over the past year as the company struggles to increase production. One trader sees shares sliding further into the summer.
That’s based on the August $2 puts. With 134 days until expiration, 10,781 contracts traded compared to a prior open interest of 136, for a 79-fold rise in volume on the trade. The buyer of the puts paid $0.36 to make the bearish bet.
Lucid shares recently traded for about $2.20, so the stock would need to drop by $0.20, or about 9%, for the option to move in-the-money. The strike price is right near Lucid’s 52-week low of $1.93.
In 2024, Lucid lost over $900 million, and its debt levels soared by over 40%. Although Lucid is sitting on about $2 billion in cash, that gives the company a limited runway to ramp up production and turn profitable.
Action to take: Lucid shares are in a downtrend, and investors have better options in the automaker space on both a profitability and valuation basis. While an immediate bankruptcy is unlikely, today’s buyers are taking on a considerable risk of loss.
For traders, the August $2 puts are well positioned for further downside in shares over the coming months. The options are also inexpensive enough that traders could see mid-to-high double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may to trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.