First, let's review what the BX stock has been doing.
Blackstone Group Inc. (BX) has been making waves in the stock market, with its shares riding a remarkable uptrend, recently reaching a 52-week high at $115.22. Investors are taking notice of BX's outstanding performance, which has outpaced the broader market in both the short and long term. Over the past year, BX has surged by an impressive 28.6%, compared to the market's 16.5% gain, and in the past month alone, it has risen by 16.6%, while the market managed just 1.8%. With such a strong track record, let's turn to an option strategy that can capitalize on this momentum while keeping risks in check.
In this blog post, we will explore the BX Sep 29 Call Spread and why it presents an intriguing opportunity
The Bull Call Spread Strategy
Source: Marketchameleon Alerts
The Bull Call Spread is a trading strategy that stands to benefit from a potential uptick in BX stock. Here's how it's structured:
Buy 29-Sep-23 113 Call
Sell 29-Sep-23 116 Call
The current market price for this spread is $1.84.
What Makes the BX Call Spread Attractive
Impressive ROI Potential: If BX's stock price climbs above the $116 strike by the time of expiration, which represents a relatively modest increase from its current level of $115.12, this call spread could deliver an impressive 63% return on the amount at risk. To put this in perspective, this return exceeds the stock's year-to-date performance of 58.6%. This illustrates the power of leveraging options to enhance returns in a short time frame.
Historical Data Support: We've conducted a historical data analysis on the spread and estimated its theoretical value to be $2.02. This suggests that the current market price of $1.84 implies a discount of -9.6% compared to its long-term average value. This discount serves as an additional cushion for investors, indicating that they are potentially getting a better deal than what historical returns would suggest.
Limited Downside Risk: In the event that BX's stock price falls below the $113 strike, the spread's risk is limited to the purchase price. This means that the potential losses are well-defined and controlled, providing a level of comfort for traders.
In Conclusion
The BX Sep 29 Call Spread offers an enticing opportunity for traders looking to capitalize on the strong upward momentum in BX stock. With the potential for a significant return in just a short holding period, along with a theoretical edge that suggests the market price is discounted relative to historical averages, this strategy combines the allure of high returns with a calculated approach to risk management. As always, it's important to conduct your own due diligence and consult with a financial advisor before making any investment decisions.
Disclaimer:
The information provided in this article is for educational and informational purposes only. It should not be considered as financial advice or a recommendation to buy or sell any securities or investment products.
