One Strategy For Dropbox Options Traders

Dropbox stock has had a slow start to 2021

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Dropbox, Inc. (NASDAQ: DBX) announced on Jan. 13 that the company would be reducing the size of its workforce by approximately 11%. This news has had little impact on the stock though, with DBX starting off 2021 languishing below breakeven. The good news is that the shares have support in place at their 40-day moving average. 

DBX Stock Chart

From a fundamental point of view, Dropbox is a very solid growth play for potential investors. The company has slightly more cash on its balance sheet than it has in total debt. The biggest fundamental positive for DBX is its fast-growing top line. The company has added about $750 million in revenues in just three years. That figure is now up over $1.85 billion in total annual revenue. In addition, Dropbox recently become profitable on the bottom line and has now begun to grow its net profits consistently.

Moreover, DBX has a forward price-earnings ratio that is currently at 23.26, making Dropbox stock one of the cheaper growth plays available on the market at the moment.

Now looks like an opportune time to get in on DBX's next move with options. The equity’s Schaeffer’s Volatility Index (SVI) of 59% stands in the low 22nd percentile of its annual range. This means options players are pricing in relatively low volatility expectations at the moment.

One word of caution for prospective options traders though. Dropbox stock currently ranks an incredibly low on the Schaeffer's Volatility Scorecard (SVS), with a score of just five out of 100. This scorecard is used to identify which underlying stock options have historically had underpriced or overpriced options. Low SVS readings indicate consistently realized lower volatility than its options have priced in -- pointing to DBX  being a potential premium-selling candidate, rather than a premium-buying candidate.

 

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