At first glance, the narrative for financial technology platform PayPal Holdings Inc PYPL appears rather suspect. Consumer sentiment sank to its lowest reading since November 2022 while inflation expectations skyrocketed, reflecting the dour environment for discretionary spending. Throw in the tariffs President Donald Trump announced last month and the pessimism only exacerbates.
Nevertheless, it’s also fair to point out that because of the subsequent volatility in PayPal stock — which is down almost 23% on a year-to-date basis — the valuation looks more attractive. Currently, PayPal shares trade at 2.13-times trailing-12-month (TTM) sales. However, based on analysts’ projected fiscal 2025 revenue of $33.06 billion, the security is trading at a multiple of 1.98.
It’s worth pointing out that currently, the analysts’ rating score for PayPal stock is only 3.1, which is the equivalent of a Hold. However, the latest individual changes were both upgrades issued in December last year. This may indicate a gradual shift in tone.
See Also: Trump Gets Fawning Praise From Pro-Cannabis PAC But He’s Not Returning The Sentiment
Fundamentally, the upgrades reflect booming demand for Buy Now, Pay Later (BNPL) services. According to the Journal of Theoretical and Applied Information Technology, younger consumers — particularly Millennials and Gen Z — have embraced BNPL for their holiday spending.
Put another way, while financial pressures certainly cloud the broader economy, modern consumers are finding ways to adapt. PayPal represents one of the leading brands facilitating this adaptation, making the company’s stock a counterintuitive prospect.
The Smart Money Sweeps Into Stock Options
Effectively a market within a market, the options arena provides valuable intelligence to retail investors — even if they’re not interested in trading these derivative contracts. Since mostly sophisticated market participants utilize options, unusual activity is always worth monitoring. And within this category, sweeps are especially significant.
By definition, sweeps are large orders designed to be executed immediately. Further, these orders are split across multiple exchanges simultaneously to access the best available prices. The takeaway with sweeps is that they are market orders, not limit orders. In other words, the emphasis is on urgency and getting into position quickly rather than negotiating for the best entry point.
Notably, the whales appear to be sensing an opportunity with PayPal. For example, on March 27, Benzinga’s options scanner identified net neutral sentiment sweeps for the $78 call. On Monday, the stock saw unusual options activity, particularly for bought $65 calls and sold $64 puts, both for the April 11 expiration date.
Stated simply, institutional players appear to be betting that PayPal’s stock will rise materially above $65. At the same time, they’re also collecting income — through the proceeds of the sold puts — assuming that share prices will not materially fall below $64.
Now, one area of concern is in the statistical realm. Using pricing data from January 2019 onward, PayPal only carries a neutral bias. A long position held for any given eight-week period only has a 49.53% chance of being profitable.
Investors typically shy away from the dips. That’s significant because PayPal is currently losing roughly 8% over the trailing five sessions. Still, with the smart money moving in, it’s possible that a recovery could materialize.
A Tempting Trade On Tap
In the aforementioned call sweep, the trader (or traders) bought the $65 calls expiring April 11 at a premium (ask) of $1.26. By logical deduction, PYPL stock must reach $66.26 at expiration for this transaction to break even. Of course, nobody trades with the intention of walking away with a draw. Therefore, it’s reasonable to assume that speculators anticipate that shares will end up higher than the intrinsic breakeven point.
As such, aggressive followers of the smart money may consider the 66/67 bull call spread for the options chain expiring April 11. This transaction involves buying the $66 call (at a time-of-writing ask of $158) and simultaneously selling the $67 call (at a bid of $109). The proceeds from the short call partially offset the debit paid for the long call, resulting in a net cash outlay of $49.
Should the stock hit or exceed the short strike price of $67 at expiration, the maximum reward is the difference between the strike prices (multiplied by 100 shares) minus the cash outlay or $51. This translates to a handsome payout of just over 104%.
Now Read:
Image: Shutterstock
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.