Options trades to play for a short squeeze in Hims & Hers as the pain piles up
Hims & Hers has been clobbered over the past week as the telehealth company stepped back from plans to sell a copycat version of Novo Nordisk’s weight-loss pill and then faced a lawsuit from the Danish pharma titan.
In these troubled times for the company, the haters are out in full force.
“HIMS is down -48% over the last month, and yet short interest continues to increase (and accelerate), suggesting hedge funds are pressing their shorts, even though shares are approaching 2Y lows (RSI is just 15),” wrote Dean Curnutt, CEO of Macro Risk Advisors. “With earnings on 2/23, this potentially sets up for a nasty short covering/squeeze event, especially since HIMS usually sees strong post-earnings follow-through.”
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Should some be tempted to catch a falling knife in the once loved stock, he offers a pair of risk-defined ways to do so via call spreads.
Curnutt’s recommendations:
Buy calls on Hims with a strike price of $20 that expire on March 20; sell same amount of $30 strike calls with the same expiry.
Buy calls on Hims with a strike price of $22 that expire on March 20; sell same amount of $28 strike calls with the same expiry.
“There is also a lot of upside call skew in Mar expiry, and this allows us to set up call spreads with extremely attractive breakevens and payouts,” Curnutt wrote.
