Commercial truck designer and manufacturer PACCAR (PCAR) is up nearly 50% over the past year. One trader sees shares pulling back in the coming weeks.
That’s based on the June $100 puts. With 51 days until expiration, 10,327 contracts traded compared to a prior open interest of 198, for a 52-fold rise in volume on the trade. The buyer of the puts paid $0.96 to make the bearish bet.
PACCAR shares recently traded for about $114, so the stock would need to drop about 13% in the coming weeks for the option trade to move in-the-money.
Shares are pulling back after hitting a 52-week high of $125.50 a month ago.
Operationally, the company is having a strong year. Earnings are up 54%, and PACCAR has a 13% profit margin, on the high end for manufacturing.
Action to take: Shares are trending lower in the short term, so interested investors should wait for that trend to reverse before investing. PACCAR pays a 1% dividend, and a further price drop may push that yield up higher.
For traders, the June $100 puts likely have some more upside to them as shares trend lower in the coming weeks. Traders can likely see mid-double-digit returns, and should also look for shares to show signs of reversing higher to take profits.
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.