Pinterest, like many stocks in the social media and growth-focused tech spaces, is in the middle of a rough year. The name has lost nearly 45% of its value in 2022, and just under 75% in the last 12 months.
Despite the carnage, it seems as though options traders are willing to start nibbling at some of these stocks. Wednesday in particular saw heavy volume.
"We saw a lot of bullish flow in social media companies, but Pinterest really stood out, trading nearly three times the average daily volume, and one trader took up almost 59% of today's volume [in Pinterest]," Tony Zhang, chief strategist at OptionsPlay, said Wednesday on CNBC's "Fast Money."
Get San Diego local news, weather forecasts, sports and lifestyle stories to your inbox. Sign up for NBC San Diego newsletters.
That trader is reaching out to catch this falling knife in a high-risk, high-reward trade that could net them more than $20 million.
"[They sold] 80,000 contracts of the August 20-puts, collecting about $2.55 [per individual contract]. That's [more than] $20 million in premium, but it obligates this trader to cough up another $140 million to buy the 8 million shares of Pinterest if it's below $20 by August expiration," Zhang said.
The trader made this bet while those 20-strike puts were in the money on Wednesday, as well. Pinterest closed Wednesday's session at $19.73 per share, leaving this trader very little room for error between now and August expiration, and making it very clear that they expect a sizeable rally in the beaten-down name.
Pinterest was trading about 2.5% higher midday Thursday.