PLUG is a hydrogen fuel cell supplier based out of Albany, NY. The company reported its results on Tuesday June 22nd after a delay due to some accounting issues. While earnings missed the mark, PLUG’s strong current and projected sales growth is viewed as more of an indicator of the company’s potential. The company also has a strong liquidity position on its balance sheet. Wall Street generally agreed with the numbers as several analysts raised their price targets.
After a 75% slump from late January to early May, the share is on the upswing and gained more than 70%. The latest strength has caused the 50-day moving average (blue line below) to rise higher for the first time in three months. Also in play is the rising 200-day moving average (red line below), which stands at $ 32.50. This trade depends on PLUG staying above the $ 30 mark through the end of July, so support for the 200 days is vital.
If you agree that PLUG will rise higher along its 200-day moving average, consider the following trade, which depends on the stock staying above $ 30 to expire in five weeks.
Buy to Open PLUG July 30, Put 27 (PLUG210730P27)
Sell to Open PLUG July 30, 30 Put (PLUG210730P30) for $ 0.95 credit (sale of an industry)
That credit is $ 0.06 below the median option spread when PLUG was trading just below $ 32. Unless the stock recovers 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 bring in $ 93.70. This trade reduces your purchasing power by $ 300 and your net investment is $ 206.30 ($ 300 – $ 93.70). If PLUG closes above $ 30 on July 30, both options will expire worthless and your return on the spread would be 45% ($ 93.70 / $ 206.30).
This entry was posted on Tuesday, June 29th, 2021 at 4:35 pm and is filed under Credit Spreads, Stock Option Trading Idea of the Week, Stock Option Strategies.