QQQ Bullish Calendar Call Spread with 382% Upside


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This QQQ Calendar Call Spread Could Pay 3.8 to 1

Bullish play with a target stock price of $318

Strategy has +382% upside potential and 14% undervalued


Strategy: QQQ Calendar Call Spread
Sell 17-Mar-23 318 Call3.17
Buy 31-Mar-23 318 Call4.21
Debit:$1.04


Invesco QQQ Trust has seen its price gain +2.1% today to $300.82. The price action today indicates stock and market strength. Setting up this calendar spread with strikes at $318 gives you a bullish bias to tap into QQQ stock's strength.

Option Profit Calculator Results for QQQ Calendar Spread at 17-Mar-23 Expiration

In this scenario, the optimal stock price for the option strategy would be $318.00 on the date of the first expiration, March 17, 2023. This is equal to the strike price of the options in the spread. Since both QQQ and the market are showing upward pressure, and the strikes are above the current stock price of $300.85, the spread is taking advantage of this bullish momentum. If the stock price is $318.00 at expiration, we can benefit from the 17-Mar-23 call, which we sold, expiring worthless, and the option that we are long, the 31-Mar-23 call, will still have time premium built in.

Since we do now know what the exact implied volatility will be on March 17, we can use our historical data to make an educated estimate to help us calculate the value of the 31-Mar-23 option. Applying the median historical implied volatility of 19.3 from similar options, the theoretical value of the call is 5.01 at the date of the 17-Mar-23 expiration. Using the above assumptions gives us a potential upside of +382% for this calendar spread.

QQQ Calendar Spread Value vs. Market Price

According to Market Chameleon estimated value, QQQ Calendar Spread is trading at a 14% discount to historical benchmark.

If we use historical data to measure how similar spreads in QQQ were priced in the market, the 4-year average price was 1.21, with a high mark of 2.06 and a low of 0.55.

Currently, the calendar call spread is bid at 0.90 and offered at 1.04. The midpoint of the spread is 0.97.

If we use 1.21 as our historical fair value benchmark, the current market ask price is at a 14% discount, while the current market midpoint represents a 20% discount.

Current PriceHistorical Values of Similar Spreads
BidAskMidpointAverageHighLow
0.901.040.971.212.060.55
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.

Takeaway

The QQQ calendar call spread we've identified here can be a good way to play a bullish outlook because the option strategy has a +382% upside potential, is 14% underpriced relative to historical measures, and will benefit from the stock price moving higher to $318.

See how Market Chameleon can help you make smarter and more efficient trades!


NOTE: Stock and option trading involves risk that may not be suitable for all investors. Examples contained within this report are simulated And may have limitations. Average returns and occurrences are calculated from snapshots of market mid-point prices And were Not actually executed, so they do not reflect actual trades, fees, or execution costs. This report is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither Market Chameleon nor any other party makes warranties regarding results from its usage. Past performance does not guarantee future results. Please consult a financial advisor before executing any trades. You can read more about option risks and characteristics at theocc.com.


The information is provided for informational purposes only and should not be construed as investment advice. All stock price information is provided and transmitted as received from independent third-party data sources. The Information should only be used as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments and trading strategies. The Company does not guarantee the accuracy, completeness or timeliness of the Information.