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Today, we’re opening a new bearish trade on Pandora (P). Despite the fact that P hasn’t been able to show how they can make money in the long-run, there may be a long-term model in the space that they operate. However, that is contingent on companies like Apple (AAPL) and Amazon (AMZN

) not getting more serious about competing with Pandora in the near term. Either way, we don’t expect P to be able to maintain current valuations considering its risks. We think trends amongst younger media-consumers and the threat of increased competition will keep investors in a selling mood this quarter.

A downgrade by Bank of America Merrill Lynch analysts on Monday, along with a completed “double top” pattern, indicates additional downside potential before earnings are released next week. We like the potential for a short-term play to the downside as investors try to reduce risk before the actual earnings release.

Buy to open the P November 18th $12 Puts (P161118P00012000) at current levels.

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