Buying A Put Option on SanDisk $SNDK

| March 27, 2015 | 0 Comments

$SNDK OptionsBuying A Put Option On SanDisk $SNDK

When a company sells off sharply, I tend to look for a reason to buy it.  It’s normal for investors to overreact to bad news and cause a stock to be oversold.  Often times, you’ll see a stock which has fallen off a cliff slowly regain ground as investors come to their senses.

However, there are other times when a major selloff is just the tip of the iceberg.

Take SanDisk $SNDK for example.

$SNDK is a large data storage provider.  They are most well-known for their removable storage cards, used for everything from cameras to mobile phones.

Currently, SNDK is trading at $66.37, down 18% on the day.  That’s 8% below the previous 52-week low of $72.17, and 38% from the 52-week high of $107.65.

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

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

For a more in-depth look at $SNDK, you can check here.

Here’s the deal…

SanDisk shares are getting hammered after the company cut its revenue forecast.  The company is seeing lower than expected sales, and lower prices to boot.  That’s definitely not a good combination.

Basically, SNDK is losing ground to competitors.  Some analysts believe its products do nothing to differentiate themselves from other similar devices.  And, the company could need a complete overhaul to catch up.

Not to mention, SanDisk supposedly lost Apple $AAPL as a customer.  Losing a big customer is always difficult.  But, when that customer is the largest company in the world, it’s obviously a crippling blow.

Here’s the chart of SNDK:

put option buying opportunity, a chart of $SNDK

As you can see above, the stock has got hammered on lowered guidance.  What’s more, back in January, the shares took it on the chin when management announced the loss of Apple as a customer.  Clearly, it hasn’t been a strong year for this company.

Now could be a great time to buy an $SNDK put option.

$SNDK is in trouble, and doesn’t look to be in for a quick recovery.  The loss of Apple as a client combined with intense competition on prices is a recipe for loss.  The company is likely going to need a major turnaround – and have a long road to recovery.

As such, buying a put is in order.  The April (17th) 65 puts are trading around $2.25 right now.  That’s a reasonable price to pay given the stock’s downside potential.  There are a little over three weeks 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.

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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.

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