[Options] Rolling the Dice
First batter up: Everi Holdings Inc $EVRI
This stock serves the casino and gambling sectors.
Here's Steve Strazza on what he's seeing:
After a sharp selloff along with most gaming, leisure, and entertainment stocks during Q1, EVRI is finally pushing back up against its year-to-date highs. Notice the consistent outperformance relative to its small-cap peers (lower pane) coming off of the March lows. This is something we want to see continue.
There is a lot of price memory in the 12.50 – 14 area so we want to be patient and allow buyers the time to absorb any excess supply. We can either own this here, against our prior objective of 13 or buy it on strength above its recent highs near 14. It all depends on your risk tolerance. The risk/reward is favorable either way you want to do it, with a price target at 20.50 over the next 3-6 months.
A $14 stock with the potential to move to $20 inside of 6 months? I'll roll the dice on that!
Here's the Play:
I like $EVRI June 20 calls for $1.20 or less here. This debit at entry represents the most we can lose and therefore we'll size our position such that we're cool if we take a 100% loss. Considering the $20 strike price is pretty far away (in percentage terms), this isn't an unreasonable expectation.
$12.00 is the price level we'll keep an eye on. If $EVRI closes below $12.00 during our hold, we'll want to be out of the trade, closing our position for whatever we can salvage (if anything).
If the momentum continues to build, we'll look to close half of this position at a double (around $2.40 per contract) to take our original risk off the table, and then we'll ride the rest into June expiration. Once we're in June, if EVRI is trading below $20 per share, then we'll close the calls for whatever we can get. Theta decay will become our enemy very quickly during expiration month. If, however, our calls are in-the-money (EVRI is trading above $20 per share), then we'll attempt to hold our remaining calls for as long as we can, until any near-term support is broken.
If you have any questions on this trade, please send them here.
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