VLO Bullish Calendar Call Spread with 310% Upside

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This VLO Calendar Call Spread Targets 310% Return

Bullish play with a target stock price of $200

Strategy has +310% upside potential and 26% undervalued

Strategy: VLO Calendar Call Spread
Sell 17-May-24 200 Call2.42
Buy 21-Jun-24 200 Call4.65

Valero Energy has increased by +1.2% today to $182.58. The shares have been in a steady uptrend since February 28, based on VLO moving averages. Setting up this calendar spread with strikes at $200 gives you a bullish bias to tap into VLO stock's strength.

Option Profit Calculator Results for VLO Calendar Spread at 17-May-24 Expiration

In this scenario, the optimal stock price for the option strategy would be $200.00 on the date of the first expiration, May 17, 2024. This is equal to the strike price of the options in the spread. Since VLO is in a technical uptrend currently, and the strikes are above the current stock price of $182.43, the spread is taking advantage of the stock's upward momentum. If the stock price is $200.00 at expiration, we can benefit from the 17-May-24 call, which we sold, expiring worthless, and the option that we are long, the 21-Jun-24 call, will still have time premium built in.

Since we do now know what the exact implied volatility will be on May 17, we can use our historical data to make an educated estimate to help us calculate the value of the 21-Jun-24 option. Applying the median historical implied volatility of 38.3 from similar options, the theoretical value of the call is 9.14 at the date of the 17-May-24 expiration. Using the above assumptions gives us a potential upside of +310% for this calendar spread.

VLO Calendar Spread Value vs. Market Price

According to Market Chameleon estimated value, VLO Calendar Spread is trading at a 26% discount to historical benchmark.

If we use historical data to measure how similar spreads in VLO were priced in the market, the 4-year average price was 3.00, with a high mark of 4.13 and a low of 1.91.

Currently, the calendar call spread is bid at 2.02 and offered at 2.23. The midpoint of the spread is 2.13.

If we use 3.00 as our historical fair value benchmark, the current market ask price is at a 26% discount, while the current market midpoint represents a 29% discount.

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


The VLO calendar call spread we've identified here can be a good way to play a bullish outlook because the option strategy has a +310% upside potential, is 26% underpriced relative to historical measures, and will benefit if the stock continues to trend higher to $200.

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

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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.

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