STX Bullish Call Spread is Undervalued at $2.10


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How this STX Bull Call Spread Works

The bottom of the STX trade card shows us that we would buy one call and sell another with the same 22-Sep-23 expiration (this is a bull call spread as indicated on the top of the card).

Buy: 22-Sep-23 68 CALL

Sell: 22-Sep-23 72 CALL

Reasons to Like This Trade

  • You can buy this spread for $2.10 when theoretically it’s worth $2.33. Simply put, the market is implying a theoretical edge of 11.1%.
  • Your maximum gain is $1.90, which means you can make an astounding 90.5% return on your investment in 16 trading days! (That's if the stock closes at 72 or above. $1.90 / $2.10 = 90.5%) At the time of this alert, the stock was trading at 69.65.
  • The stock only needs to close at, or above, 72.00 after 16 trading days for you to realize this maximum return. That’s only a 3.4% gain! If you look at STX historically drift, you will find that 63% of the time the stock drifted higher than 3.4% in 16 trading days. Based on historical stock behavior (historical stock drift) the spread has a 63% chance of success.
  • 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 72.00. 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 STX 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 STX Bullish Relative Performance 3 Month
    Relative Performance 2-Wk Outperform Bullish STX Bullish Relative Performance 2 Week
    Seasonality Weak Bearish
    Technical Uptrend Bullish STX Bullish Technical Indicator
    Historical Price Action 63% Uptrend Bullish STX Bullish Historical Price Action
    Option Order Flow Sentiment Positive Net Option Delta Bullish STX Bullish Option Order Flow Sentiment

Conclusion

This trade in STX looks like a good opportunity because:

  1. 5 out of 7 bullish indicators support positive momentum
  2. 90.5% potential return on your investment
  3. Theoretical edge of 11.1%
  4. The stock price is only 3.4% away from the price for you to make the maximum gain!

Don't Let an Opportunity Pass You By!


How to Find More STX 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


Relative Performance

STX stock has underperformed the market in the last year with a return of +4.9%, while SPY returned +15.3%. This shows that you would have done better investing in the overall market (through SPY) over the last year than in STX shares. However, STX has outperformed the market in the last 3 month and 2 week periods, returning +15.9% and +9.1%, while SPY returned +8.1% and +2.9%, respectively. This indicates STX has been having a stronger performance recently.

Learn about a stocks relative strength


Seasonality: Weak

The strategy involves holding the position from Aug 31 to Sep 22 expiration. Historically, this has been a weak seasonal period. In the past 12 years, STX shares have decreased 58% of the time between Aug 31 to Sep 22, while averaging a return of -2.1%. Learn how to look up stock seasonality.

Technical: Uptrend

The stock price and moving averages are all crossing each other in a positive trend.

Historical Price Action: 63% Uptrend

In the last 4 years, there were 24 historical samples of STX stock price movements over the same time period as this option spread. The stock moved up 63% of the time for an average return of +4.3%.

How to generate statistics on a stocks historical price return distribution

Option Order Flow Sentiment: Positive Net Option Delta

At the time of this STX trade idea, bullish option order flow exceeded bearish option order flow. The net option delta volume was 44 K.

Learn more about option delta volume.

Find out the latest sentiment from the options market for STX


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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.