By Dmitry Pargamanik
See More Trade Ideas for SHOP
How this SHOP Bull Call Spread Works
The bottom of the SHOP trade card shows us that we would buy one call and sell another with the same 28-Apr-23 expiration (this is a bull call spread as indicated on the top of the card).
Buy: 28-Apr-23 40 CALL
Sell: 28-Apr-23 45 CALL
Reasons to Like This Trade
- You can buy this spread for $3.55 when theoretically it’s worth $3.90. Simply put, the market is implying a theoretical edge of 10.0%.
- Your maximum gain is $1.45, which means you can make an astounding 40.8% return on your investment in 22 trading days! (That's if the stock closes at 45 or above. $1.45 / $3.55 = 40.8%) At the time of this alert, the stock was trading at 45.75.
- The stock only needs to close at, or above, 45.00 after 22 trading days for you to realize this maximum return. Since the stock is already above your ideal price of 45.00, you have a cushion in the strategy. The stock can decline by -4.8% and you'll still break even. If the stock stays here or goes higher you will make your max gain.
5 out of 7 indicators are pointing to a bullish sentiment in the stock, which is enough to believe there is a decent chance the stock price could hit its mark of 45.00. Look, nobody knows for sure if the stock is going to go up or down, but, if you had to handicap the stock price, these metrics are indicating that SHOP is really riding the momentum of bullish signals.
Metric Signal Bull or Bear Relative Performance 1-yr Underperform Bearish Relative Performance 3-Mon Outperform Bullish Relative Performance 2-Wk Outperform Bullish Seasonality Strong Bullish Technical Bearish Historical Price Action 61% Uptrend Bullish Option Order Flow Sentiment Positive Net Option Delta Bullish
This trade in SHOP looks like a good opportunity because:
- 5 out of 7 bullish indicators support positive momentum
- 40.8% potential return on your investment
- Theoretical edge of 10.0%
- The stock price is already at the price point for you to make your max gain and can even go down by -4.8% and you'll still break even!
Don't Let an Opportunity Pass You By!
How to Find More SHOP Bull Call Spread Strategies
How you can find bull call spread trade ideas for other stocks
And if you want to find more bull call spreads for other stocks, go to the bull call spread screener
Historical Price Action: 61% Uptrend
How to generate statistics on a stocks historical price return distribution
Option Order Flow Sentiment: Positive Net Option Delta
At the time of this SHOP trade idea, bullish option order flow exceeded bearish option order flow. The net option delta volume was 84 K.
Learn more about option delta volume.
Find out the latest sentiment from the options market for SHOP
Videos you might like
How to Screen for the Best Bull Call Spread
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.