Cloudflare (NET), a cloud platforms and cybersecurity services company, reported earnings after the bell on Thursday, beating analysts’ estimates for revenue, profit and forecast. In response, several analysts raised their price targets to a range between $ 88 and $ 105 (the stock closed at $ 85.95 on Friday).
Despite the positive profit and the targeted price increases, the stock fell nearly 6%. But it stayed above its soaring 50-day moving average, a trendline that supported the stock during a year-long rally that saw the stock more than quadruple. With the positive result, price increases and technical support, the rally should continue.
If you’re okay with NET rallying to continue, consider the following trade, which has the stock staying above $ 85 until the expiration in five weeks.
Buy to Open NET 19MAR21 80 Puts (NET210319P80)
Sold to Open NET 19MAR21 85 Puts (NET210319P85) for $ 2.35 credit (sale of a vertical)
This balance is $ 0.05 below the midpoint of the options spread when NET was trading near $ 86. If the stock doesn’t recover quickly from here, you should be able to get close to that amount.
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 233.70. This trade reduces your purchasing power by $ 500 and brings your investment to $ 266.30 ($ 500 – $ 233.70). If NET closes above $ 85 on March 19, both options will expire worthless and your return on the spread will be 88% ($ 233.70 / $ 266.30) or 915% on a yearly basis.
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: Bearish Options Strategies, Bullish Options Strategies, Cloud Storage, Cloudflare, Diagonal Spreads, Monthly Options, NET, Weekly Options
This entry was posted on Monday, February 15th, 2021 at 3:18 pm and is filed under 10K strategies, last minute strategy, lazy way strategy, monthly options, trading option of the week for stock options, weekly options.