Shares of cloud-based data platform
Snowflake (SNOW) have been trending higher for months, although got caught in a downtrend toward the end of the year. One trader sees that trend reversing in the coming months.
That’s based on the March $350 calls. With 71 days until expiration, 6,091 contracts traded against a prior open position of 152, for a 40-fold rise in volume. The buyer of the calls paid $24.50 to make the trade.
The stock last traded for about $332, so a move to $350 would require shares to move just over 5 percent higher. With a 52-week high of $405, that looks easily achievable.
Snowflake more than doubled its revenue last year, with a 110 percent jump higher. However, the early-stage company still lacks profitability, and currently analysts have no expectations for the company to have a profitable quarter.
Action to take: The company is still in growth mode, so buying off the top on a pullback looks like an attractive way to play shares higher. Investors might like shares, although it will likely be years before the stock pays a dividend.
For traders, the option looks like a solid trade relative to its cost. It has the potential for mid-to-high double-digit yields if shares start to trend back up in the next few weeks, and on a jump higher could fare even better from there.
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.