A little over a month ago, Equifax Inc. (NYSE:EFX) was essentially un-ownable. An inexcusable data breach that exposed the personal information of 143 million consumers sent Equifax stock tumbling to the tune of 35% in just a few days, with some observers opining the worst was yet to come.
If the worst is indeed yet to come, the masses certainly don’t believe it. EFX stock has since bounced back from its mid-September low of $89.59 to its current price near $109, and the rebound effort looks like it’s getting its second wind. What gives? In short, with the initial shock of the setback wearing off, a few analysts and speculators are suggesting the steep selloff was overdone, deeming Equifax stock a buy after its beatdown.
Maybe they’re right, and the credit bureau will ultimately shrug off the gaffe and move ahead as if it never happened. But then again, maybe that won’t happen. And there’s the rub. EFX stock may be a bargain, but there’s also the possibility that it may not have yet hit its bottom.
What if, however, there was a way make a speculative trade on Equifax stock without taking a huge risk but still setting yourself up for an oversized reward?
Anything But a Sure Thing
There’s reasonable logic to the possibility. Whereas consumers can easily sever their patronage with restaurant chain Chipotle Mexican Grill, Inc. (NYSE:CMG) or shop somewhere else than a habitually offensive store like Abercrombie & Fitch Co. (NYSE:ANF), lenders that rely on Equifax’s information can’t as easily tap another provider like TransUnion (NYSE:TRU) or Experian plc (ADR) (OTCMKTS:EXPGY).
Still, no one can predict the future for Equifax stock with any meaningful degree of certainty. Buy the stock at your own peril.
Or don’t buy the stock. If you’d like to tap into the possible looming rally, buy super-cheap call options instead.
Smart Play on Equifax Stock
For those who aren’t familiar with equity options, here’s a quick explanation. An option is a contract to buy or sell (but not the obligation to do so) 100 shares of XYZ stock at a set price by a certain date. A call option is the right to make such a purchase, while a put option is a right to sell shares. They’re attractive because they’re cheap — much cheaper than it would be to outright buy or sell 100 shares of said stock — and they tend to move considerably faster than an underlying stock does.