During another muted session on Wall Street, financial technology (fintech) giant SoFi Technologies (NASDAQ:SOFI) saw its shares move against the grain, moving up about 1% on Wednesday. Making news was Ark Invest founder and CEO Cathie Wood, who recently bought a large volume of SOFI stock. Adding to the brewing sentiment, options trading dynamics indicate the possibility of short-covering speculation.
According to The Street, the Ark Fintech Innovation ETF (NYSEARCA:ARKF) acquired 179,841 shares of SOFI stock on Tuesday. Based on the security’s closing price of $7.99, the transaction came out to a value of roughly $1.4 million. Further, the purchase lifted Ark’s holdings of the popular fintech to 1.9 million shares. That’s worth about $15.3 million and represents a weighting of 1.49% of the ARKF exchange-traded fund.
Notably, SOFI stock also received a nod of approval from Jim Cramer, who hosts CNBC’s Mad Money program. Last month, the outspoken media personality stated that SOFI “…is up substantially from where it was in the spring. I think (CEO Anthony) Noto’s doing a great job. I remain a buyer.”
In late October, SoFi posted its third-quarter earnings report, revealing record revenue of $537 million. Just as well, the company added more than 717,000 new members during the period.
Bullish Speculation May Reemerge for SOFI Stock
While the ambitious financial enterprise delivered some encouraging results, not everything aligned with investors’ expectations. For example, during the aforementioned Q3 report, the company posted a loss of 29 cents per share. That expanded unfavorably from the year-ago quarter’s loss per share of 9 cents, raising some skepticism toward SOFI stock.
Conspicuously, SoFi also contributed to the disappointing initial public offering of Instacart (NASDAQ:CART) as a secondary underwriter. Under traditional IPOs, underwriters acquire large volumes of the issuing company’s securities. Thus, they risk losses if they can’t resell the shares at a premium. Interestingly enough, SOFI stock has largely been on a downward trend since the CART debut on Sept. 19.
Nevertheless, SOFI stock is presently enjoying a surge of momentum. In the trailing five sessions, it swung up almost 10%. Further, it appears that options traders are taking note. Per Fintel’s options flow screener — which exclusively targets big block transactions likely made by institutional investors — a major entity (or entities) sold 6,206 contracts of the Feb 16 ’24 8.00 Put earlier today.
Should SOFI stock drop below the $8 strike price prior to the Feb. 16, 2024 expiration date, the put seller (writer) would be on the hook to buy shares at the strike, assuming the countervailing party exercises the contract.
Adding to the high-stakes scenario, another party sold 10,968 contracts of the Jan 19 ’24 9.00 Call. That will obligate the call writer to buy SOFI stock at the strike if shares rise above the threshold before expiration. Given how relatively close SOFI is to reaching $9, this sets up a possible short-covering scenario.
Why It Matters
Within the past three months, SOFI stock carried a consensus view of hold among Wall Street analysts. This assessment breaks down as five buys, six holds and two sells. Overall, the average price target lands at $9.15, implying a roughly 14% upside from the time of writing.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
