Market Overview

Play Current Trend

Play Current Trend (PCLN) is setup for a short-term (7-day) bearish option strategy. Investors could simultaneously: 

Sell the July week-one expiration PCLN Industries $845 call for $1.88 (yesterday's closing price)


Buy the $850 call at $1.10 (yesterday's close) 

The difference between funds received and paid out is a .78 per share credit which we keep if closes below $845 on Friday July 5th, but immediately exit the position if it appears the price will end up higher. If the stock price gaps higher then we will probably initiate the call spread at a higher strike prices with the same risk profile as described above. See Guidelines page at for explanation on how trade is set up.                                                                                                          

Why we recommend it:

As observed in the chart down below,, Inc. (NasdaqPCLN) stock price has been stuck in neutral for the past month. The upper green line highlighted on the chart confirms the price has been held below this level since the middle of May. The lower green line is the price support that the stock has remained above for the past month. The upcoming fourth-of-July holiday should be a slow, short trading week as traders take vacation time to go to the beach. Unless something extraordinary happens over the next few days, expect the current trends for the market and stock to continue. has reward shareholders as the stock is up almost 30% this year. Also used very little of its cash on capital expenditures which allowed the company to devote much of its cash flow from operations into stock buybacks. The long term question is whether stock has become too expensive compared to its competitors. Future earnings and revenue growth will have to remain extremely high for stock to maintain its lofty valuation. A Forbes article mentions that Short sellers may already believe will decline as the stock made the list of the most shorted Nasdaq 100 components. We are betting shares remain constrained during the holiday, at the very least there is a high probability the stock will remain below the target price for another week.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Options Markets Trading Ideas


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