There is much debate about the latest unemployment data. In August, unemployment dropped to its lowest level in five years — but one of the main reasons could be that many people have stopped looking for work.
Here is a trade idea on a company that could give many of those people a helping hand:
LinkedIn (LNKD — $252.22): Put Credit Spread
The trade: Sell the Sep 21 235/240 Put Credit Spread (selling the Sep 21 240 put and buying the Sep 21 235 put) for 75 cents or better.
The strategy: The maximum potential profit for this trade is 75 cents if LNKD is trading above $240 at September expiration. The maximum loss is $4.25 ($5 – $0.75) if LNKD is trading below $235 at expiration. Breakeven is $239.25 at expiration based on a credit of 74 cents.
The rationale: LinkedIn announced earnings at the beginning of August, and investors were pleased, sending the stock soaring after the announcement. However, judging by the last unemployment report, there still are plenty of people looking for jobs. This could be critical for LinkedIn’s continued success.
Just this past week, LNKD announced it would issue $1 billion worth of new stock, and eventually ended up raising $1.2 billion. LinkedIn said the proceeds will be used to strengthen its balance sheet, among other things.
Click to Enlarge If you look at the chart, LinkedIn stock blew though a resistance area around $240 last Thursday. Previously, the stock could not find a way to successfully close over that plateau two days in a row until Friday.
A weak market and some profit taking could hold LNKD stock back this week. But that previous resistance, which is now potential support, looks strong enough to keep it from moving lower again for at least two weeks.
As of this writing, John Kmiecik did not hold a position in any of the aforementioned securities. Get a free trial of John’s live options trading room here.