[Options] Taking Advantage of Options Flow
Check out this setup in SoFi Technologies $SOFI:
I'm loving the consolidation just below IPO highs, as well as the rising relative strength. If the bull market in stocks continues, we can expect $SOFI to continue to be a leader in the next leg up.
Options volatility in this name is somewhat elevated, so we're going to make a directional bet with an options spread to both lower our cost of participation as well as increase our odds of profitable success.
Here's the Play:
I'm buying a $SOFI October 20/30 Bull Call Spread for approximately $2.40. This means I'll be long the 20 calls and short an equal amount of 30 calls for a net debit which represents the most I can lose in a worst-case scenario.
During my hold, if $SOFI breaks and closes below $19 per share, that will be my signal to close the trade at the open of the next trading day. (Never any rush to exit a trade with defined risk if we size our position appropriately from the start!).
On the upside, if $SOFI makes a run at the ASC price target north of $28, then I expect we'll have plenty of opportunities to book a profit in this spread. I'll be looking to close this spread for a $6.20 credit if I can get it. This would represent capturing at least 50% of the maximum possible gain in this spread, and a more than doubling of my invested capital.
This is a best practice that I'm consistent with. I have no interest in holding this spread all the way into October expiration trying to squeeze out a few extra dimes while risking giving back all of my open profit. Let somebody else sweat it out.
If you have any questions on this trade, please send them here.
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