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Reserve Your Spot in OpenTable

Try OPEN call options following the stock's high-volume breakout


We are now into March, and for many, spring is just right around the corner. A lot of people especially in cold-weather climates tend to stay home more often when the weather is cold. Pretty soon, though, the weather will warm up and more people will be out and about.

Here is a trade idea on a company that can help get you to dinner … and hopefully pay for the outing as well.

OpenTable (NASDAQ:OPEN — $58.27): Long Calls

The trade: Buy the April 60 calls for $2.50 or less.

The strategy: The long call is probably the most fundamental option strategy. The strategy can profit if the stock rises and the call premium increases to an amount more than was paid. Maximum profit is unlimited because OPEN can continue to rise, and the maximum loss is $2.50 or whatever was paid if OPEN finishes below $60 at April expiration. Breakeven is $62.50 at expiration based on a cost of $2.50.

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The rationale: OpenTable provides computerized reservation systems and management for restaurants. Business has been good, with 49% of restaurants using the service and about 16% of diners making their reservations thorough OpenTable in the U.S. And, with the continued growth of mobile devices, there is no telling how much its business will grow.

Just this past week, OpenTable stock traded at its highest level in more than a year. OPEN has been flirting with a resistance area at $56 for a couple of weeks now, and on Friday it was able to close well above it on heavy volume.

Breakouts tend to fail, but breakouts that close above resistance with authority and volume behind it have a better chance to keep moving higher, as is with the case of OPEN.

Book your reservations tonight through OpenTable, and hopefully in the next few days this trade idea will have made enough to cover the check and then some.

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

Article printed from InvestorPlace Media,

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