Trader bets PayPal’s hot run is about to cool off

As PayPal soars to new highs, one trader is betting the stock has gone too far too fast.

Shares of the digital payment company have charged higher this year, now up more than 25 percent since January. However, according to “Options Action” trader Mike Khouw the stock’s big run could be heading for a slowdown when it reports earnings on Wednesday.

On Tuesday, PayPal saw a surge in options trading — nearly three times the average daily volume. Shares of the California-based company have an implied move of about 5 percent in either direction, or a near $6 billion market cap swing, when it reports earnings after the bell.

Within the options activity, one trader purchased 8,000 of the 91/88/85 put butterfly spreads for $0.60.

“They’re targeting that 88 dollar price by Friday, that would be a decline of about 2 percent from where [PayPal] is currently trading,” Khouw explained Tuesday on CNBC’s “Fast Money.” “So not as big as the options market is implying, but certainly a move that would be to the downside.”

Contrarily, “Fast Money” trader Tim Seymour, who is long the stock, is optimistic that PayPal can continue its bullish momentum.

“I like PayPal. I think the valuation is now at a place where it’s challenging,” he explained. “[But] there’s no question to me these guys are in the right space."

Shares of PayPal are up 58 percent in the past year and were trading higher on Wednesday afternoon around $92.26.

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Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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