Chipmaker
Marvell Technology (MRVL) soared nearly 25% on Wednesday following boosted guidance for its fourth quarter. One trader is betting shares rallied too far, too fast, and will trend lower in the coming months.
That’s based on the March 21, 2025 $110 puts. With 105 days until expiration, 4,221 contracts traded compared to a prior open interest of 119, for a 35-fold rise in volume on the trade. The buyer of the puts paid $6.95 to make the bearish bet.
Marvell shares recently traded for about $119, a 52-week high, so the stock would need to drop by $9, or about 8%, for the option to move in-the-money.
Given the gap higher in shares, a drop to the low $100 range could occur in the coming months. Markets tend to seek out price gaps higher like the one from this week and “fill” the gap over time.
Marvell trades at 38 times forward earnings, pricier than the overall stock market, and is still operating at a loss, both factors that could limit further upside from here.
Action to take: Interested investors should hold off for a pullback for now. With the gap higher, Marvell’s fundamentals need to catch up or shares need to give back some of their recent gains. Investors should look for an opportunity to buy shares if they drop to the $110-115 range.
For traders, the March 21, 2025 $110 puts are well positioned for shares to give back some of their gains. Traders should look for mid-double-digit returns and look to close out the trade before expiration.
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.