[Options] There's Interest in Pinterest

Sean McLaughlin
August 10, 2022

Every idea that we put on at All Star Charts starts with a technical setup that we like. We are students of price action and that supercedes everything.

It's nice when our technical analysis lines up with "other" factors that may support our idea, be they fundamental, news, or in this case, insiders and activist activity.

Here's what our team noticed in an email to ASC subscribers earlier this week:

The most significant insider transaction on today’s list is a Form 4 filing for Pinterest $PINS.

We wrote about PINS on July 15, when Elliott Management announced a large activist stake.

Now that the second quarter blackout period is behind Pinterest, CEO William J. Ready is also buying shares. He just reported a rather sizable $5 million purchase.

We can’t think of many things more bullish than the CEO getting involved following the insider activity from Elliott last week.

CEOs and Activists buying big positions? That has our attention.

Here's a chart of the setup as we see it:

As you can see, $PINS broke out above that recent triangle pattern, and the price action has remained tight since then, suggesting there is a strong bid underneath the shares by somebody trying to accumulate a large position.

This has us interested in tagging along for a ride, using a defined-risk options spread to participate.

Here's the Play:

I like buying a $PINS November 25/35 Bull Call Spread for approximately $2.00. This means I'll be long the 25-strike calls and short an equal amount of 35-strike calls for a net debit which represents the most I can lose in this trade:

Since the possibility exists that we could lose 100% of our invested capital in this trade, we'll size our position accordingly.

If all the stars align in our favor, we'll look to take profits on this trade by exiting the entire position for a $6.00 credit. This would represent a capture of 50% of the most we can make in this spread, without having to hold the risk all the way into Thanksgiving. Take our profits and run, that's how I like it.

In the meantime, if $PINS can't hold above $21 per share, then any close below $21 is our signal to exit the trade and book a manageable loss.

If you have any questions on this trade, please send them here.

ASO subscribers who missed last week’s live video Jam Session can catch it here.

~ @chicagosean

P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7991.

 

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