Buying A Put Option On Box $BOX

| June 12, 2015 | 0 Comments

cloud computingBuying A Put Option On Box $BOX

There are typically ample opportunities to find attractive call option to buy on a weekly basis.  It’s fairly common to find stocks that have been oversold in the short-term.  There are plenty of reasons for overselling to take place.

On the other hand, overbought stocks are harder to identify.  That’s because a company’s future is much more subjective than a company’s past.  In other words, it’s much easier to judge past actions then guess on future potential.  Moreover, stocks tend to stay overbought much longer than they remain oversold.

Still, it’s good to diversify your strategies, especially when market volatility starts to ramp up.

That’s why I picked Box $BOX as a candidate for a selloff.

$BOX is a provider of a cloud-based enterprise content collaboration platform.  In other words, it’s a way to store and share content online.  The company is relatively new to the public realm, with its IPO happening earlier this year.

Currently, BOX is trading at $18.37, down 23% so far for the year.  That’s 25% below the 52-week high, and 12% from the 52-week low.

So is now the time to buy a put option on $BOX?

As a reminder, a put option makes money when the underlying stock goes down.  Is Box going to continue to fall?

For a more in-depth look at $BOX, you can follow the link.

Here’s the deal…

Box shares have spiked higher this week on better than expected earnings.  The company beat on both the top and bottom line (though it isn’t yet turning a profit).  In response, analysts have upgraded the price target.

Basically, the company signed several big deals this past quarter.  The big customer wins impressed analysts.  And more importantly, it helped to improve the company’s outlook.

However, while BOX may have impressed in the short-term, I’m not a long-term fan of the company.

You see, $BOX has some major competition.  The business is in direct competition with Dropbox (not yet public – but does almost the exact same thing).  Plus, huge players such as Google $GOOGL and Amazon $AMZN offer almost exactly the same services.

Here’s the chart of $BOX:

put option buying opportunity, a chart of $BOX

As you can see above, the stock has basically gone sideways, with a moderate downwards bias, since the IPO.  It just broke above the 50-day moving average on better than expected earnings.

Now could be a great time to buy a $BOX put option

$BOX posted some pretty solid news, but it’s definitely in trouble in the long-term.  What the company does is very commoditized to begin with.  And, the competition is intense (and in many cases backed by bigger resources).

As such, buying a put is in order.  The December 18 puts are trading around $2.25 right now.  That’s a reasonable price to pay given the stock’s downside potential, and nearly six months left until expiration.

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

Tags: ,

Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.

Leave a Reply

Your email address will not be published. Required fields are marked *