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Ride the JNPR Stock Rally With This Options Play

Sometimes an old dog can learn new tricks — and really good ones, at that. Such appears to be the case for Juniper Networks (JNPR) as JNPR stock flashes a rare combination of attention from Wall Street’s smart money, an overall supportive chart and fairly priced options.

It’s been some time since I’ve been drawn to JNPR stock as a bullish position. It’s also been a long stint since Juniper has demanded that sort of attention.

But now a couple interesting factors are supportive of a rally in JNPR stock. Most notably, Juniper is smartly growing its brand in the booming cloud space within the broader networking arena.

A collaboration with Aerohive Networks (HIVE) is one fresh initiative shareholders of JNPR stock can look forward to. The two companies are working to “deliver a simple, secure, and cloud-managed” solution to retailers, school systems and government customers.

Secondly, a report earlier this week from Goldman announced its top “dispersion” buy candidates with JNPR stock making the cut of 25 companies with compelling stock prospects.

Goldman uses “dispersion” to describe stocks which are less likely to be impacted by macro events in the broader market and more likely to see shares react strongly to company-specific factors. And analysts see upside of in excess of 20% in JNPR stock.

Hedge Funds and another part of the so-called smart money have also been net buyers of JNPR stock over the past quarter. According to InsiderMonkey.com four more hedge funds piled into JNPR stock, while the total dollar value of positions increased by $205 million to an aggregate $1.83 billion as of the end of the second quarter.

JNPR Stock Daily Chart

jnpr-daily-chart
Source: Charts by TradingView

Right now, the JNPR stock chart looks mostly supportive of higher prices to come.

During the broader market’s price route, JNPR stock has managed to respectably hold a key gap fill and use its 38% Fibonacci level and 200-day simple moving average as support. That’s sturdy backing for bulls.

JNPR’s correction of just 15% is also favorable. As a larger midcap tech name, Juniper should have seen a much larger price decline, given the broader market’s corrective plunge and loss of key price supports.

The fact JNPR stock isn’t being more severely punished suggests interested buyers in spite of all the potential bearish ammunition which could negatively impact shares.

JNPR Long Call Strategy

jnpr-volatility
Source: Charts by TradingView

A long call strategy is a good approach for JNPR stock as premiums offer a nice combination of being relatively affordable compared to underlying volatility, and the stock is trading at reasonable levels within its monthly range.

Goldman hopes the shaky market won’t affect shares negatively, but I prefer a bit more cautious approach. With the JNPR stock earnings tentatively set for late October, the use of an out-of-the-money, softer delta January call is the preferred positioning.

This approach capitalizes on the potential for a positive earnings reaction, while keeping downside risk contained to the smaller debit associated with this type of long call position.

On top of that kind of guaranteed safety, the trader can always look to use some type of stop loss on JNPR stock or the option itself to further reduce potential drawdowns.

Reviewing the board, the January $27 call for $1.00 is attractive. On an expiration basis, a move in JNPR stock to $29 is needed to capture a double or 100% return, which is just below late July’s highs and less than Goldman’s price estimate.

Even better, with earnings for JNPR stock roughly a month out, traders have plenty more time on the calendar to capitalize on time premium and reduced risk of pressured implied volatility. This looks like a smarter money way to play shares of Juniper along with the big boys.

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. Mr. Tyler currently holds no positions in any of the securities discussed in his personal or managed family accounts but may initiate, for better or worse, a position in two or more business days following the publication of this article.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/09/juniper-jnpr-stock-poised-rally-best-capture-profits/.

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