Shares of GoPro Inc (NASDAQ:GPRO) have been up, down and all around the past couple weeks. But with the technical forecast firming up and supported by the recent GPRO stock earnings report, bullish investors can use options to safely ride the next wave to higher ground.
GoPro, the once wildly popular new kid on the block and action sports-based technology outfit isn’t picture perfect these days.
Nearly three years since beginning its treacherous fall from the graces of Wall Street, the company, and shares of GPRO, are showing signs of life off and on the price chart.
Sure, GPRO is still considered more of a speculative vehicle. Profits for one are still absent. But an early August earnings topper and upbeat outlook from management did provide evidence a turnaround in-the-making is possible for a company faced with a near death experience not so long ago.
Bottom line, top-line as well as those squiggly lines associated with GPRO stock’s moving averages and the likes, if seeing is believing, this strategist optimistic a second and more durable wave is just building and waiting to be ridden.
GPRO Stock Daily Chart
Click to Enlarge
In early August, immediately following GoPro’s well-received earnings beat I cautioned shares looked good overall as a speculative long. Given the large price gap, it was also noted a likely pullback could be fairly deep while still confirming an emerging uptrend. That’s what more or less played out.
Over the last couple of weeks, GPRO initially rallied more than 13% before quickly stalling and reversing at 2017’s prior highs set in early February in front of a bearish earnings-related gap.
More recent, a pullback of around 20% from high to low has established a higher low that’s successfully tested a prior converging resistance line, which was penetrated by the early August earnings reaction.
GoPro confirmed the low last week, but only moved marginally higher. Now GPRO stock sports an oversold stochastics crossover — more evidence supporting the bullish narrative.
GPRO Stock Long Call Strategy
Hopefully,
Click to Enlarge
investors booked some nice-sized profits from a previously discussed long call purchase as GPRO stock crested. While fleeting, profits swelled by about 150% over two sessions and offering ample opportunity to lock in gains, ride the position for free or be creative and adjust into a spread.
After reviewing GoPro’s options for a second and hopefully larger wave for bulls to hop on board, the Jan $11 call is favored. With GPRO stock at $9.26 the call is priced conservatively for 50 cents.
The premium for this longer-dated out-of-the-money call trades below GPRO stock’s near-term price volatility. That’s attractive in isolation. Historically though, the price being paid for this contract is more or less fair to maybe offering a modest theoretical edge for bullish investors.
A second and important advantage in this strategist’s view is starting a position with defined risk. The call’s premium amounts to roughly 6% of GPRO stock ownership.
The call also offers a nice amount of time to realize potentially very strong gains if shares can rally from here and provide more evidence on the price chart that GPRO is really back—or at least riding a new wave of enthusiasm by investors.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits and feel free to click here to learn more about how to design better positions using options!
