This cloud stock is due for a big rebound heading into the new year. Using options to play it
Nishant Pant breaks down this bull call spread options trade.
TL;DR
- Snowflake's stock dropped nearly 20% in nine trading sessions.
- The stock drop occurred despite beating earnings estimates.
- The author identifies a potential trading opportunity based on mean reversion.
- Key technical signals being monitored are MACD (5, 13, 5) bullish crossover, RSI pivoting higher from oversold territory, and price stabilizing around $216.
- A proposed trade is a SNOW 225-230 bull call spread with a cost of approximately $250 per spread.
- The trade involves buying the $225 call and selling the $230 call with January 16 expiry.
- Maximum profit is achieved if Snowflake closes at or above $230 by expiration, resulting in a 100% return on the trade.