So with the recent sell-off in all the could computing stocks, what should we do? The two most interesting in this group are VMW and CRM. Both have been up significantly this year and a pullback should not be treated as an opportunity to exit them. Instead, it gives us a great chance to buy them. How would I do this? Well, to buy 1,000 shares of CRM even at current levels, it would cost $105,000. That's alot of dough. The option chains provide a much cheaper way to participate in any upside in the stock to follow the brutal selling.
The trade? Let's take a look at a short-term approach:
Short-term:
Look at the Oct 110 strike calls that expire in about a week. They are currently trading at $1.20 and any upside in the stock north of $2-$3 would mean at least a 50% move in the option. Remember guys, to participate on the equivalent of 1,000 shares of upside in the stock, we are only shelling out $1,200 (versus $105,000 worth of stock)!
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