PANW Bullish Calendar Call Spread with 231% Upside

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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

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
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.


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.

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