Shares of 3D world-building company Roblox (RBLX) are down about 75 percent in the past year. One trader sees a further decline in the coming weeks.
That’s based on the January 13th $30 puts. With 32 days until expiration, 5,037 contracts traded compared to a prior interest of 238, for a 21-fold rise in volume on the trade. The buyer of the puts paid $2.19 to make the downside bet.
Shares recently traded for about $32, so the stock would need to drop about 7 percent for the option to move in-the-money. There’s certainly more room for downside, as shares have a 52-week low just under $22.
Revenue has grown by less than 2 percent for the company in the past year, and it’s continued to lose money, with net income showing a $777 million loss over the past year. That’s resulted in a -35 percent profit margin.
Action to take: The company’s valuation is still high given its recent low revenue growth and earnings losses. Shares will likely see a move down, even just as part of the current market weakness. Investors should wait until a retest of the recent lows before considering going long.
For traders, the January put doesn’t have much time to play out. But it can likely deliver mid-double-digit gains, particularly on any further market drop in the coming weeks.
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.