With the market in alot of uncertainty at the beginning of the trading week, there's one thing for certain. That is, people still love cloud computing and the action in CRM yesterday proved just that! With the S&P500 down over 1%, CRM closed flat. I believe the stock is in a consolidation stage and will soon be ready for its next leg higher!
An interesting opportunity lies within the September 125-130 Call spread. This trade allows you to take advantage of the low option pricing with under 2 weeks left until expiration. And what makes us want to put on this trade? It's not just the bullish uptrend this stock is experiencing, its the PRICING of this call spread. It can be purchased for just $0.75 with a potential of $5 of upside if the stock were to close at $130 and options expiration. But that's not the end of it, one could then sell the $110 strike for almost $0.70 essentially making the trade as close to FREE as possible (the trade would only cost about $0.05). I think realizing the full $5 at expiration is unlikely, but a move upward in the stock of only 2-3% over the next few days could result in a handsome return on this trade (potentially as much as 50% - 100%)!! I also believe that getting put the stock at $110 is unlikely and if that were to occur, it would create a handsome opportunity to be long the stock.
Summary of the trade:
Trade Type: Purchase 125/130 Call-Spread, $110 put write
Price: $0.05
Max Profit: $5.00
Time to expiration: 10 days
Congrats to those of you you who put on the trade! :)
ReplyDeleteSeems like we're already up 30% and the market has only been open 16 mins!!!