Shares of travel services company Sabre Corporation (SABR) have shed about one-third of their price over the past year. One trader sees shares trending lower in the first half of this year.
That’s based on the July $7.00 put. With 184 days until expiration, 42,714 contracts traded compared to a prior open interest of 110, for a 388-fold jump in volume on the trade. The buyer of the puts paid $1.22 to make the bearish bet.
Shares last traded for just under $7, leaving these options slightly in-the-money. Shares have traded as low as $4.46 in the past year, and a move closer to that low could lead to high-double-digit returns for the option.
Despite a 50 percent jump in revenues in the past year, Sabre remains unprofitable, losing nearly $500 million in the past year.
Plus, the company has nearly $4 billion in net debt on the balance sheet, nearly twice the value of the company’s equity. That’s a high enough level to indicate trouble if things don’t turn around quickly.
Action to take: Investors should avoid shares right now, as they look overpriced considering the company’s losses. If that starts to narrow, shares may start to move higher from a lower price compared to today.
For traders, the July puts are attractive for an at-the-money trade. Traders can likely grab mid-double-digit profits quickly well before the options expire.
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.