In the money game on Wall Street Hasbro, Inc. (NASDAQ:HAS) stock bulls find themselves in the midst of a solid winning streak.
Shares of the toy and board game company have enjoyed a rocket-ship ride, sending them 31% higher year-to-date. The bulk of the gains have come following both of this year’s better-than-expected earnings announcements.
Outside of earnings season, HAS stock scored a compelling breakout or two with another one in the offing.
At its current perch, Hasbro’s stock chart is a thing of beauty. It sits atop a rising 20- and 50-day moving average and has been coiling nicely following April’s stellar earnings jump. Distribution days have been absent, showing no signs of major selling.
The near-term resistance level at $72.60 is providing a clean, low-risk entry for those looking to hop on Hasbro’s next advance. A breakout of this level will serve as the trigger for our long call trade idea below.
As is often the case the implied volatility (not shown) for Hasbro stock options has gotten clobbered following its recent earnings announcement. This volatility crush reflects the rapid cheapening of option premiums, which decreases the risk of buying options here.
Simply put, with HAS options on sale we can snatch them up for lower prices — reducing the money at risk if we’re wrong.
The IV rank stands at the 15th percentile of its one-year range, which is its lowest ranking so far this year.
Roll the Hasbro Dice with Long Calls
If you’re looking to game additional upside in HAS stock over the coming month, consider grabbing some long calls to profit.
You could buy the Jul $70 call for $3.70. The maximum loss is limited to the initial $3.70 cost and will be lost if HAS stock falls below $70 by expiration.
The maximum gain is unlimited allowing you unfettered participation on any further upside in HAS over the next two months.
To get a sense of how far Hasbro needs to rise by July expiration to at least break even on the long call play, we can add the call premium to the strike price ($3.70+$70). With a breakeven of $73.70, the Jul $70 call only needs HAS stock to rally about $1.15 over the next two months.
Quite doable, to say the least.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.
