031. PIGGISH PLAY - Short Shopify Inc. (SHOP)
Hypothetical Future Conversation Between Robinhood Bro and Co-Workers:
Co-Worker 1 (Enters conversation late):
So what stock are you bros talking about.,?
Shopify? Hah! More like Shopi-fucked!
Am I right!? (left-handed fistbump left hanging)
Right!? (right-handed fist bump left hanging)
Come on guys, am I right or what?
Co-Worker 2: I just lost half my 401-k because of Shopify. Dick.
End of Conversation
While Co-Worker 1 is a metaphor for "huge office douche", he isn't totally wrong here. Shopify isn't fucked per se, it is simply that it is very likely to lose approximately 500 USD per share in the near-term. Believe it or not, this level of price depreciation would still put Shopify amongst the most overvalued stocks in the market, even if it were the only company to lose any share value over the future period.
In the lower right-hand corner of the chart, you can see the extent to which I place importance on fundamental analysis for my trade setups. While these figures are mostly unimportant these days, the current valuation of Shopify's common stock is so profoundly mispriced that I had to highlight a few of the metrics. 250+ price to earnings is a silly joke, but 41.11 price to sales is straight-up stupidity. There isn't a singular company that should be trading at over 40 times sales because sales are inherently unpredictable due to the nature of, um, sales.
What I mean is that sales of a corporation are only as predictable as the future business environment that a company inhabits. We just had a pandemic, so I will not belabor this point further. Another company that is obscenely overvalued is ServiceNow, which has comparable metrics displayed beneath Shopify's. Even though ServiceNow qualifies as its own silly joke, Shopify is simply residing in an entirely different galaxy altogether.
Right, but who cares?
I know that this information has been publically known for over a year now, but the market hasn't exactly not been in a hysterical bubble either. The upshot to this is that there is an incredible amount of support-free space located just under 1023.00.share (see Many-Bag Line).
The incredibly corrective nature of the structure leading up to the all-time high is either a triple zig-zag or a triple combination non-standard pattern. The difference is semantic in this case because the implications are the same: there is a lot of room to the downside and it is very likely to get there soon.
Thus, I present the Pig-Specs,
PIG SPECS:
MAIN: Buy Long (PUTS): Strike Price: 1080/share; Expiration: 06/18/2021
OFFSET: Buy Long (CALLS): Size: 1/4 Main; Strike: 235l Expiration: 06/11/2021
REASONING: Shopify speculative puts are expensive, all else equal. Rightly so - the thing moves more than a hundred points in a day, when volatile. While Implied Volatility is low across the board right now, I see it ticking higher every day. Therefore, while I still think the speculative puts on Shopify are trading at a bargain, they will become very expensive shortly. Additionally, it seems option writers aren't willing to go down in premium anywhere near the money despite the low IV - the best bang for buck lies just outside the 1100 area - hence the 1080 strike recommendation.
IWM is sure to be the winning ETF should the market find a way to continue to new highs over the next few weeks. It is very unlikely though, which is why I made the offsetting size (number of contracts relative to total value of main (SHOP) puts purchased.
Also, see TTD related idea for a similar setup that came to fruition some months back.
In conciusion, short Shopi-fucked before some douche in your office makes you feel bad about not doing so.
-ShopPigShort
SHOP
IXIC
US100
NDQ
US100
SPX
US500
GLOBALPRIME:US2000
Co-Worker 1 (Enters conversation late):
So what stock are you bros talking about.,?
Shopify? Hah! More like Shopi-fucked!
Am I right!? (left-handed fistbump left hanging)
Right!? (right-handed fist bump left hanging)
Come on guys, am I right or what?
Co-Worker 2: I just lost half my 401-k because of Shopify. Dick.
End of Conversation
While Co-Worker 1 is a metaphor for "huge office douche", he isn't totally wrong here. Shopify isn't fucked per se, it is simply that it is very likely to lose approximately 500 USD per share in the near-term. Believe it or not, this level of price depreciation would still put Shopify amongst the most overvalued stocks in the market, even if it were the only company to lose any share value over the future period.
In the lower right-hand corner of the chart, you can see the extent to which I place importance on fundamental analysis for my trade setups. While these figures are mostly unimportant these days, the current valuation of Shopify's common stock is so profoundly mispriced that I had to highlight a few of the metrics. 250+ price to earnings is a silly joke, but 41.11 price to sales is straight-up stupidity. There isn't a singular company that should be trading at over 40 times sales because sales are inherently unpredictable due to the nature of, um, sales.
What I mean is that sales of a corporation are only as predictable as the future business environment that a company inhabits. We just had a pandemic, so I will not belabor this point further. Another company that is obscenely overvalued is ServiceNow, which has comparable metrics displayed beneath Shopify's. Even though ServiceNow qualifies as its own silly joke, Shopify is simply residing in an entirely different galaxy altogether.
Right, but who cares?
I know that this information has been publically known for over a year now, but the market hasn't exactly not been in a hysterical bubble either. The upshot to this is that there is an incredible amount of support-free space located just under 1023.00.share (see Many-Bag Line).
The incredibly corrective nature of the structure leading up to the all-time high is either a triple zig-zag or a triple combination non-standard pattern. The difference is semantic in this case because the implications are the same: there is a lot of room to the downside and it is very likely to get there soon.
Thus, I present the Pig-Specs,
PIG SPECS:
MAIN: Buy Long (PUTS): Strike Price: 1080/share; Expiration: 06/18/2021
OFFSET: Buy Long (CALLS): Size: 1/4 Main; Strike: 235l Expiration: 06/11/2021
REASONING: Shopify speculative puts are expensive, all else equal. Rightly so - the thing moves more than a hundred points in a day, when volatile. While Implied Volatility is low across the board right now, I see it ticking higher every day. Therefore, while I still think the speculative puts on Shopify are trading at a bargain, they will become very expensive shortly. Additionally, it seems option writers aren't willing to go down in premium anywhere near the money despite the low IV - the best bang for buck lies just outside the 1100 area - hence the 1080 strike recommendation.
IWM is sure to be the winning ETF should the market find a way to continue to new highs over the next few weeks. It is very unlikely though, which is why I made the offsetting size (number of contracts relative to total value of main (SHOP) puts purchased.
Also, see TTD related idea for a similar setup that came to fruition some months back.
In conciusion, short Shopi-fucked before some douche in your office makes you feel bad about not doing so.
-ShopPigShort
SHOP
IXIC
US100
NDQ
US100
SPX
US500
GLOBALPRIME:US2000
Trade active:
Were just at the top of the second path drawn above. Bought some puits just now...
Trade closed: stop reached:
I rolled my contracts over to next week because this has now become a stellar opportunity with an explosive binary outcome. Strangling same-week expirys will be a profitable trade, but I cannot turn this into a last-minute winning idea.
I'll take the loss like a true man (bear-pig). Sorry if you expired worthless, the upshot is a nearly perfect second setup next week, which will surely net a profit over the entire period. Not a recommendation or justification, just something to consider.
I'll take the loss like a true man (bear-pig). Sorry if you expired worthless, the upshot is a nearly perfect second setup next week, which will surely net a profit over the entire period. Not a recommendation or justification, just something to consider.
