GoPro Approaches IPO Pricing: 2 Trades for GPRO Stock

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GoPro (GPRO) fans should be counting their lucky stars. Because of its massive drop over the past year, GPRO stock now sits a mere pebble toss from its IPO price. ‘Twas a price very few had a chance to snatch up shares at due to the high demand for the camera maker last June. You’ll recall that shares of GPRO shot higher right out of the gate.

Would-be buyers should be eyeing the coming IPO price test with interest. If there was ever a logical spot for the ailing momentum stock to finally attract some buyers, it’s near the original selling price in the $29 zone.

Of course, if you already own GPRO stock then its return to the humble beginning is far from a welcome development. Quite the contrary, any shareholders unlucky enough to have acquired their shares north of $80 are ruing their purchase.

GPRO

The beauty of the coming IPO price test is it sets up an interesting “if-then” opportunity. Depending on how old GPRO behaves, I can see an attractive play for both the bulls and bears alike.

Pick Your Poison

In light of the wet blanket that has been cast upon stocks across the board, let’s begin with a bearish GPRO play. For starters, I would recommend holding off on entering any immediate bearish trades on GPRO. With the stock already having fallen so far and nearing a potential support level a bit of patience is warranted.

The better play is to wait for GPRO stock to take out the $29 support zone and then pull the trigger on your bearish trade of choice. If you think the stock is really going to bite the dust, I suggest buying the Jan $30/$25 put spread. If you can buy the spread for $2.50 or less, you will have the chance to double your money if the GPRO stock price falls to $25 by January expiration.

If you’re itching to begin accumulating shares of GPRO, I suggest waiting for confirmation the stock is going to remain above the $29 threshold. Upon seeing some type of bounce or at least stabilization near support consider selling the Nov $28 put for $2.60 or so. If the GPRO stock price can remain above $28 for the next month, you’ll pocket the entire $2.60 which is a hefty amount of income for such a low-priced stock.

Should GPRO fall below $28, you will be obligated to buy 100 shares at expiration for each contract you sell. If you received $2.60 premium, your cost basis for the shares of stock will be $25.40.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/09/2-trades-gpro-stock/.

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