Shopify (SHOP) Might Be a UFO!

I’ve been on a shopping spree! What have I been buying? Umm…just normal earthling things!

Today’s UFO sighting is Shopify! But before I get to that…

What’s the Word on the Street?

Indexes are up today, extending all time highs as the bull market continues. A new trade deal was announced with Japan that has 15% tariffs across the board. A similar one is expected soon with another major trading partner: the EU.

In other news, Alphabet (Google) will be reporting earnings after the closing bell today. It will be interesting to see how it’s still spending on AI. That might continue to fuel a rally in tech/semiconductors, or it could give investors pause depending on the results.

Shopify (SHOP)

What Is It?

Shopify, Inc. engages in the cloud-based commerce platform designed for small and medium-sized businesses. Its software is used by merchants to run business across all sales channels, including web, tablet and mobile storefronts, social media storefronts, and brick-and-mortar, and pop-up shops. The firm's platform provides merchants with a single view of business and customers and enables them to manage products and inventory, process orders and payments, build customer relationships and leverage analytics and reporting. It focuses on merchant and subscription solutions. The company was founded on September 28, 2004 and is headquartered in Ottawa, Canada. The listed name for SHOP is Shopify Inc. Class A Subordinate Voting Shares.

Why Is It a Possible UFO?

Primarily what other option traders expect and its volatility are the reasons SHOP could be a UFO.

What About Recent News?

SHOP received a downgrade from Buy to Hold from Loop Capital yesterday and the stock has taken a bit of a tumble. It’s also worth keeping in mind that last week’s consumer sentiment report showed that consumers are increasingly upbeat about the economy, despite having their wallets stretched. There could still be more room for SHOP to run and I like to take advantage when investors overreact.

What’s the Current Price?

This is a bit of fresh air compared to some of the other companies I‘ve written about recently, as SHOP has gone up only ~11% this year. It took quite the hit around Liberation Day in April, but in the past three months its gone up ~33%.

What’s the Fair Value?

I’d first like to emphasize that fair value is subjective. Many analysts at many banks and institutions rate stocks differently and assign fair value in their own unique way. So, what I like to do is take all the recent fair values since the most recent earnings report and average them. In this case…

Since SHOP’s most recent earnings report on 05/08/2025, it has received 14 ratings and taking the average, the fair value might be somewhere around: $119. 8 ratings are a buy, 5 are a hold, and 1 from Morningstar is unknown. The lowest price target is $91, while the highest is $145.

I mentioned in the Recent News section of this post that Loop Capital downgraded from Buy to Hold and kept their price target at $120. It’s not in the second image of recent ratings, but I factored it into the average.

The current price is very close to the average fair value, but with my preferred strategy of selling puts, I can target a strike below the current and fair value prices.

What Do Options Traders Think?

Calls are trading over equidistant puts, which means traders think there is a chance to the upside. You can see because… forget about the green columns and focus on the red. Notice how on the right side for the $117 put it says $6.25, it’s $7.85 for the equidistant call at $122.

The premium (the credit you receive for executing the trade) is currently less for selling puts, as opposed to selling calls. Basically because of that, option traders expect the stock to go up, rather than down.

How About Volatility?

The IV rank (the purple line) for SHOP (stock price in blue) is currently hovering around 42.24, which is fairly elevated. This makes short strategies (which are what I prefer) more attractive.

What’s the Trade?

My preferred trade is a variation of the wheel without the rolling, AKA cash-secured puts. I typically like to target stocks that offer a dividend and are below fair value. 

Why a dividend? If the trade results in assignment and I’m on the hook for X amount of shares, I can at least be satisfied knowing I picked a (hopefully under fair value) company that will pay me a small amount while I run the other side of the trade AKA covered calls.

It’s a fairly low-risk strategy (all options trading is risky!), that has a higher probability of success, but requires a higher amount of collateral. 

SHOP does not offer a dividend unfortunately, but that’s not a dealbreaker!

So if you saw the most recent image above, I already STO (sold to open) 1 contract of the $102 put for the August 29th expiration earlier this morning. I like to have a DTE (Days To Expiration) that is around ~45 days.

When the trade reaches 50% profit I will buy it back. I don’t like to be greedy and go for more profit, because I would rather not waste my time being in a trade for too long.

What About Alternative Trade Ideas?

1. If the collateral requirement is too high, another idea is a put credit spread. You would sell a put at a strike below the current share price and then buy a put at a lower strike than the put you sold. By doing so, you will avoid the collateral requirement of a cash-secured put, but the credit received will be smaller. Also, if the trade goes sideways, you will not be assigned shares so no collecting dividends and running covered calls afterwards.
2. Just invest! 1 share or even fractional shares are a way to get a foothold in a stock that you think might increase in value.

Wait…Where Are the Candlesticks? And All the Other Indicators?

I know many traders love their candlesticks and a ton of indicators. I prefer simplicity. Candlesticks aren’t necessary unless you’re the kind of trader that wants to try and pick the perfect moment to execute a trade, and even then it’s not a sure thing. 

As for indicators, there are a ton. Some of them work sometimes. None are perfect. I don’t want to get bogged down with too many. You’ll drive yourself crazy looking at too many of them, so find a handful you like and stick with those.

Disclosure

• I currently have an open trade with SHOP (as mentioned in this post).
• No trade is a sure thing. There is always risk involved. 
• This blog post is not meant to take the place of financial advice, but hopefully acts as a guide for learning or informational purposes.