After a strong gap higher in February on earnings, Panera Bread Co. (PNRA) has consolidated in the $115-120 area. The 20-day EMA has provided nice support in the market pullback the last few weeks. The stock could be on the verge of breaking out and testing $130 per share in short order.
We will utilize an April debit spread that offers a low risk/high reward setup. Utilizing the 125/130 call spread, we can generate a 400 percent return on the trade if Panera can close above $130 per share at April expiration.
Beware of low liquidity and wide spreads however in the options. We prefer to leg in and out of the trades for the both entry and exits in order to avoid some of the associated problems with low liquidity.
We have also provided a portfolio update for readers following along with the trades.
Trade Idea:
BUY +2 VERTICAL PNRA 100 APR 11 125/130 CALL @.85 LMT
Trade Details:
Type: Bull Call Spread
Expiration Month: April
Breakeven Level(s): $125.85
Maximum Gains: $830
Profit Taking Level: $625
Maximum Loss(es): -$170
Stop Loss: -$115