JC published a piece on Monday highlighting the rotation we’re seeing into Transportation stocks. A bunch of names on that list have already experienced some good moves. But one of the names is likely to start playing catch up and that has me interested.
Here’s the chart of $CSX Corp. Like everything else, CSX had a scary selloff in February and March of this year. But it has since reclaimed much of the lost territory and appears to be ready to launch another run at all-time highs.
From an options trading perspective, I’m loving that implied volatility in $CSX options is near the lowest levels of the year, which means calls options are cheap here. Cheap = more leverage to our benefit if $CSX runs from here.
So let’s keep it simple and ride the rails!
Here’s the Play:
We’re looking to buy $CSX January 85 calls for $2.25 or better.
This is a defined risk play and the most we can lose is the premium we pay up front. I’ll use this information to size my position such that if it happens, the loss is well within an acceptable range for my portfolio. That said, I’ll look to exit this position if there’s any premium left if $CSX closes below $70/share at any time during this hold.
If a run to all-time highs materializes, then we’ll look to close half of our position at a double (roughly $4.50 per contract) and then we’ll attempt to hold the rest into January. When the new year begins, we’ll evaluate where our calls are (are they in-the-money or out-of-the-money?) and make a decision on whether to cut and run or hold for more.
If you have any questions on this trade, please send them here.
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