[Options] A Bull Phase for Enphase Energy $ENPH?
Here's the Play:
We're buying an $ENPH Nov/Dec 350-strike Call Calendar Spread for approximately $6.25. This means we'll be short the November 350 calls and long an equal amount of December 350 calls for a net debit which represents the absolute most we can lose in this trade.
The PnL graph for this trade shapes up like this:
This trade makes money if $ENPH trends higher. But timing plays a key role in how profitable the trade becomes.
If $ENPH spikes up to $350 or higher before our short November calls expire, then we'll want to exit the trade and take our highly likely profit. As you can see from the graph above, once this stock gets above $350 per share, then we get on the downsloping side of our PnL curve. No bueno. The amount of our profit will be determined by when the breach of $350 takes place. The closer to November expiration, the more profitable the trade will be.
If $ENPH takes its time to develop its breakout and our short November $350 calls expire worthless, then we'll be left holding our long December 350 for another month with theoretically unlimited upside should we see a breakout in December. That said, at any time in December, if our long calls are out-of-the-money, I'll look to exit the position and salvage whatever is left of the premium in these calls. Theta will be our enemy at this point as we approach expiration.
For risk management purposes, I'll lean against $275. If we see $ENPH close below $275 at any time during our hold, we'll exit the entire position for whatever we can get to prevent any further losses.
If you have any questions on this trade, please send them here.
ASO subscribers who missed last weekβs live video Jam Session where we review activity in our options portfolio from the past week can catch it here.
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.