We can’t remember the last time we purchased a straight call option. But with volatility sitting at such low levels and equities sort of “floating” higher on low volume, the opportunity seems to be presenting itself.
Corning Inc, (GLW) has pulled back to a strong level of demand, making it a likely target for upside price action over the next month, in which we have a target of around $23 per share. This would be a re-test of the February highs.
The May 18 call option can be purchased for around $2.80. Being that the option is already In-The-Money, we reduce the affects of time decay while getting almost dollar for dollar movement with the underlying stock.
The breakeven at expiration is the strike price plus the premium paid, which comes out to $20.81. We will open a good-til-canceled (GTC) stop limit price of $1.50. Note, this position will need to be closed out prior to expiration to avoid assignment of 100 shares of the underlying stock, assuming it is still In-The-Money.
Trade Idea:
BUY +1 GLW 100 MAY 11 18 CALL @2.80 LMT
Trade Details:
Type: Long Call
Expiration Month: May
Breakeven Level(s): $20.80
Maximum Gains: Unlimited
Profit Taking Level: $300
Maximum Loss(es): -$280
Stop Loss: -$150
