Earlier today, trader sold 3500 June $20 puts for $1.05 credit to finance 7000 June $22.50 calls for $0.65. Open interest is zero on both strikes. Can't argue with the activity. Technically, see daily chart on the right, the stock is making second attempt to break above $22 resistance after a long consolidation. Earnings just might give us that and bullish activity seems to be betting on that. Fundamentally, the stock is trading at 3x cash and 14x earnings, relatively cheap-to-fair valuation.
Given the bullish activity I am buying the following calendar:- Buy to open June $22.50 calls
- Sell to open May $22.50 calls
I just filled partial order for $0.30 and will try to fill the rest later today or tomorrow for the same $0.30 or $0.25. I think this is a really cheap shot on upside bet. This is due to simple fact that May $22.50 calls are going for $0.50, but by converting to May/June calendar, we can bet on the upside with 40% less cost and Theta in our favor. I like the odds.
Good luck!
