We’ve opened a new bullish trade on Papa John’s (PZZA). As the S&P 500 hovers just above support at 1,875, we think it’s time to add a little bullishness to our portfolio.
Looking at the PZZA chart, one thing that should be apparent is how well the stock has done during September while the rest of the market has been pulling back to test the lows established in late-August.
That’s because football season has started and everyone is buying pizza and wings — both of which Papa John’s is happy to provide.
Just take a look at a long-term chart of PZZA and see what the stock has done at the beginning of October for the past few years — it goes up. We expect the same to happen again this year.
With a little more than a month to go before PZZA’s quarterly earnings announcement, we think we have plenty of time to take advantage of both a steady uptrend in the stock and a steady increase in implied volatility.
Use a limit order to ‘buy to open’ the PZZA November 72.50 Calls (PZZA151120C00072500) for a maximum price of $3.00.
The bid/ask spread is relatively wide for PZZA’s options. This is a great opportunity to try and split the bid/ask spread with a limit order. Of course, the spread should narrow a bit as buy orders start coming in, but make sure you don’t end up paying more than you expected with a market order.
(You can learn more about identifying price patterns – like bearish engulfing patterns – and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.)
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.