Shares of hard drive manufacturer Western Digital Corporation (WDC) are down 35 percent in the past year as PC sales have started to slow. One trader sees a potential recovery ahead.
That’s based on the June 2023 $45 calls. With 248 days until expiration, 7,002 contracts traded compared to a prior open interest of 105, for a 67-fold rise in volume on the trade. The buyer of the calls paid $3.38 to make the bet.
The stock last traded just under $36, so it would need to rise about $9, or 25 percent, for the option to move in-the-money.
Western Digital has gone from trading at 8 times earnings last quarter to 13 times forward earnings expectations, as traders see the company likely struggling in the year ahead.
Action to take: Patient investors can start buying shares again should shares get back near their 52-week low near $31.50. At present, the company doesn’t pay a dividend, so buyers should be patient when looking to get back in. Like many tech stocks, the price may soar as soon as the rate hike cycle comes to an end, but that could still be a few months off.
For traders, with a current downtrend, the June calls can be watched for now, as they’ll likely get cheaper in the coming weeks. A downside bet, like the January 2023 $35 puts, last going for about $3.70, are a more likely bet, with a potential for double-digit gains.
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.