Lyft Options Trader Makes Bullish Bet Ahead Of Earnings

Up to this point, Lyft Inc LYFT IPO investors have been sorely disappointed with the stock’s public debut. However, with Lyft’s first public earnings report and the Uber IPO looming, at least one options trader is making a big bullish bet on Lyft.

On Monday morning, Benzinga Pro subscribers were notified of an unusually large Lyft option trade.

The Trade

Prior to Monday’s open, a trader bought 1,508 Lyft call options at a $70 strike price that expire on June 21. The calls were purchased at the ask price of $2.497 and represent a $376,547 bullish trade ahead of the company’s earnings report. The break-even price for the call options is $72.497, more than 18 percent above today’s premarket trading price.

Options Insight

Even when they are not options traders themselves, many stock traders watch the options market closely for unusual trading activity. By understanding what options traders are thinking, stock traders can gain insight into what to expect from a stock in terms of volatility and direction.

Options trading is typically seen as more advanced than stock trading, and large options traders are often considered to be relatively sophisticated. When large options trades are executed, traders often assume the trade may be coming from an institution or a wealthy individual with a potentially unique point of view on the stock.

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Lyft Relief Rally?

When it comes to Lyft, expectations for the coming weeks seem extremely low. Analysts have speculated Uber will siphon off investment dollars and attention from its smaller rival when it hits the markets this week. Traders are also expecting some big losses when Lyft reports its first earnings report on Tuesday afternoon. Monday's options buyer may feel expectations are now so low for Lyft in the near term that the stock could experience a relief rally if it clears an extremely low bar this week.

Unfortunately, it can sometimes be difficult to gauge a trader’s true sentiment toward a stock based on options trades along. Traders often use options trades to hedge against much larger stock positions, such as a major short of Lyft ahead of earnings. In this instance, the relatively small $376,000 options bet is likely too small to represent a hedge against a large stock position.

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