Boeing Co (NYSE:BA) shares are flying high in early morning trading following better-than-expected earnings. The aerospace juggernaut posted earnings of $2.47 per share, which easily surpassed analyst estimates of $2.32.
Today’s gains are adding an exclamation point to the ascent that began last Halloween. BA stock was up 17% since staging a major breakout over $138.
The multi-month rally was sufficient in turning the price trends higher across all time frames. A quick glance at the accompanying price chart will reveal rising 200-day, 50-day and 20-day moving averages.
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Heading into this morning’s release, Boeing stock had been consolidating for weeks, which shouldn’t be surprising given the Dow Jones Industrial Average‘s recent inability to breach the pivotal 20,000 level.
As one of the Dow’s largest components, today’s earnings-induced pop for BA may well be the catalyst needed for the long-awaited breakout.
How to Capitalize on the Boeing Stock Launch
Following this morning’s earnings release, we should see implied volatility drop into the basement for BA stock options. And that means what was expensive before earnings has now become cheap. I suppose the aggressive crowd could scoop up call options to capitalize on further upside in Boeing shares, but I’m going to suggest a lower-risk route.
At $160, BA options are more expensive than most lower-priced stocks. Fortunately, we can cut the cost by purchasing a call spread instead. If you’re willing to bet the uptrend continues over the coming months, buy the April $165/$170 bull call spread for around $1.80.
The vertical spread consists of buying to open the $165 call while selling to open the $170 call. The max risk is limited to the initial $1.80 net debit and will be lost if Boeing stock sits below $165 at expiration.
The max reward is limited to the spread width minus the net debit, or $3.20, and will be captured if the stock can rise above $170 by expiration. By risking $1.80 to gain $3.20, the strategy offers an impressive 178% return on investment.
At the time of this writing, Tyler Craig held no positions on any of the aforementioned securities.
