Shares of space infrastructure company Redwire Corporation (RDW) have lost over half their value in the past three months. One trader sees the possibility for a strong rebound in the next few weeks.
That’s based on the March $7.50 calls. With 38 days until expiration, 6,988 contracts traded compared to a prior open interest of 156, for a 45-fold increase in volume. The buyer of the calls paid $0.38 to make the trade.
With shares last trading around $5.60, the stock would need to rise about 33 percent in just over six weeks for the option trade to move in-the-money. That’s a steep, but possible move, as the stock has traded as high as nearly $14 in just the last three months.
Action to take: Redwire is an early-stage company, and as such is expected to continue losing money for some time. However, as an early player in commercial space exploration with its orbital resupply business, it could grow into a large player in an eventually massive industry. That makes shares an interesting long-term speculation here.
In the short run, it’s clear shares are heavily oversold and due for a bounce. Traders might like the calls, which are inexpensive enough to offer even triple-digit gains before expiration. But traders should use any jump higher as an opportunity to close out with a fast profit.
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 of the companies mentioned in this article.