PANW Bullish Calendar Call Spread with 231% Upside


Re-Tweet
Share on LinkedIn

This PANW Calendar Call Spread Targets 231% Return

Bullish play with a target stock price of $275

Strategy has +231% upside potential and 16% undervalued


Strategy: PANW Calendar Call Spread
Sell 08-Dec-23 275 Call2.36
Buy 22-Dec-23 275 Call4.55
Debit:$2.19


Palo Alto Networks price is now up +1.1% today to $263.32. The shares have been in a steady uptrend since November 16, based on PANW moving averages. Setting up this calendar spread with strikes at $275 gives you a bullish bias to tap into PANW stock's strength.

Option Profit Calculator Results for PANW Calendar Spread at 08-Dec-23 Expiration

In this scenario, the optimal stock price for the option strategy would be $275.00 on the date of the first expiration, December 8, 2023. This is equal to the strike price of the options in the spread. Since PANW is in a technical uptrend currently, and the strikes are above the current stock price of $263.51, the spread is taking advantage of the stock's upward momentum. If the stock price is $275.00 at expiration, we can benefit from the 08-Dec-23 call, which we sold, expiring worthless, and the option that we are long, the 22-Dec-23 call, will still have time premium built in.

Since we do now know what the exact implied volatility will be on December 8, we can use our historical data to make an educated estimate to help us calculate the value of the 22-Dec-23 option. Applying the median historical implied volatility of 31.9 from similar options, the theoretical value of the call is 7.26 at the date of the 08-Dec-23 expiration. Using the above assumptions gives us a potential upside of +231% for this calendar spread.

PANW Calendar Spread Value vs. Market Price

According to Market Chameleon estimated value, PANW Calendar Spread is trading at a 16% discount to historical benchmark.

If we use historical data to measure how similar spreads in PANW were priced in the market, the 4-year average price was 2.60, with a high mark of 4.06 and a low of 1.41.

Currently, the calendar call spread is bid at 1.89 and offered at 2.19. The midpoint of the spread is 2.04.

If we use 2.60 as our historical fair value benchmark, the current market ask price is at a 16% discount, while the current market midpoint represents a 22% discount.

Current PriceHistorical Values of Similar Spreads
BidAskMidpointAverageHighLow
1.892.192.042.604.061.41
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.

Takeaway

The PANW calendar call spread we've identified here can be a good way to play a bullish outlook because the option strategy has a +231% upside potential, is 16% underpriced relative to historical measures, and will benefit if the stock continues to trend higher to $275.

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



Contact Information:


If you have feedback or concerns about the content, please feel free to reach out to us via email at support@marketchameleon.com.


About the Publisher - Marketchameleon.com:


Marketchameleon is a comprehensive financial research and analysis website specializing in stock and options markets. We leverage extensive data, models, and analytics to provide valuable insights into these markets. Our primary goal is to assist traders in identifying potential market developments and assessing potential risks and rewards.



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.