A Breakout to Unite Us All!
Here's the chart we discussed last night:
We both agreed we like this long if the stock was above $190 per share. It's been above that level this week and today it's offering us a slight pullback to get in at better prices.
Volatility is relatively tame in this name overall, but there is a skew towards higher implied volatility in the out-of-the-money calls on the upside. So we're going to leverage that to our advantage with a spread.
Here's the Play:
I like a $UTHR Nov 200/230 Bull Call Spread for $10.00 or lower. This means I'll be long the 200 calls and short and equal amount of 230 calls for a net debit which represents the most I can lose in this trade. As I type this, the spread is quoted around $9.00, but the open interest and volumes are pretty light. So we may have to work our orders a bit to get filled. I'll be patient and will inch my limit order up to get filled (but I won't exceed $10.00).
If we see a $UTHR close below $182 per share, that's my signal that the breakout we're expecting needs a bit more work. As such, I'll close the entire spread down to limit any further losses.
On the upside, I'll look to close this trade for a $20.00 credit if I can. This would be a doubling of my invested capital and a 50% capture of the maximum possible gain in this trade if held all the way to November expiration. Let somebody else sweat out the last nickels in the trade all the way to November expiration. I'd rather just catch the easier profit and move along to something new.
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