Exciting Software Stock for Options Bulls

Short sellers are underwater following an October buildup

Jun 27, 2023 at 12:42 PM
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Subscribers to Schaeffer's Weekend Trader options recommendation service received this DBX commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Software name Dropbox Inc (NASDAQ:DBX) is an interesting name to watch, especially after the file hosting company announced new artificial intelligence (AI) products in late June and gapped higher post-earnings in early May. The equity is also breaking out above a trendline connecting lower highs since August 2021 and took out its February highs earlier this month, as well as its August closing highs more recently.

DBX Chart June 272023

Amid the stock’s improving technical backdrop, analysts are still timid, with seven of the 13 covering brokerages recommending a tepid "hold" or worse rating. Plus, short interest would take more than four days to cover at DBX’s average pace of daily trading, with short sellers already underwater following an October buildup. Dropbox stock also sports implied volatility (IV) that’s lower than 96% of readings from the past year.

It’s worth noting that, over the past two weeks, the six biggest open interest (OI) changes are short-term puts. Our recommended call has a leverage ratio of 6.3, and will double on a 16.7% pop in the underlying shares.

 

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