Trailing a $395,500 Bet in Shopify
In a previous Trade of the Day issue, we examined how we tracked a “Sharp Paper” buyer into Beyond Meat – which resulted in a winning trade.
Today, let’s do the same thing with Shopify (NYSE: SHOP).
Headquartered in Ottawa, Canada, Shopify offers cloud-based commerce platforms for small and medium-sized businesses in the United States, the United Kingdom, Canada and Australia.
The company’s platform gives merchants a single view of their business and customers across various sales channels. It enables store owners to manage products and inventory, process orders and payments, ship orders, build customer relationships, leverage analytics and reporting, and access financing.
Over the last 52 weeks, Shopify has been a Wall Street darling – gaining 118% (far outpacing the 12% gain on the S&P 500 over the same time frame).
But lately, as you can see from the chart below, the stock has been trending lower…
Is this a time to buy shares at a reduced level?
According to one Sharp Paper buyer, that answer is no.
Here’s the story…
Last Thursday at 10:15 a.m., a Sharp Paper trader bought 300 of the Shopify November $300 puts – expiring this Friday – for $4.80 per contract.
Thirty minutes later, another transaction crossed the tape for 491 more of these contracts at $5 per contract.
All told, it was a $395,500 bet that Shopify would soon be moving even lower.
And so far, this Sharp Paper buyer has been right.
As of this morning, 1,400 of these contracts still remain in open interest. Only now, they’re worth $8 per contract.
Action Plan: It often pays off to track a Sharp Paper buyer like this – and follow their lead. It’s even more powerful tracking a Sharp Paper buyer who (so far) has been right!
Does Shopify have room to fall further?
Current support levels were tested – and held up – back in October. So you certainly could expect a bounce here. However, someone out there bought $395,500 worth of Shopify puts, which are now worth $632,800 – and they think it’s still going lower. For now, let’s continue to follow the lead of this Sharp Paper put buyer. You can follow along too by joining me in The War Room today!
About Bryan Bottarelli
Bryan graduated with a business degree from the highly rated Indiana University Kelley School of Business, and his first job out of college was trading stock options on the floor of the Chicago Board Options Exchange. He was mentored by some of the country’s top floor traders in the heart of the technology boom from 1999 to 2000, where he learned to identify and implement some of his most powerful trading secrets. Now he shares his secrets with a group of elite traders. We will be republishing some of his highly sought after content from his free e-letter, Trade of the Day.