If you believe in second acts, look no further than GoPro Inc (NASDAQ:GPRO). But as an investment with the real possibility of a hard landing, a GoPro stock bull vertical spread is hard to beat. Let me explain.
It has been a wild ride for GoPro stock investors the last couple years. Shares of GPRO rocketed optimistically higher on the back of its Hero action camera — only to crater to below its 2014 IPO over the next two years.
An all-time-low of $8.62 in March of this year sat a rough and tumble 91% below GoPro stock’s hyped-up, killer product high of $98.47 in October 2014.
Much of the dizzying decline comes down to increased competition and a series of management, product refresh missteps along the way. But that was then and this is now for GoPro stock.
On September 19, GoPro could begin to reclaim some its former glory with investors as the company rolls out its anxiously anticipated Karma drone.
There’s also increasing speculation GoPro will debut a strong camera refresh with Hero 5. It has been two years since its last product iteration and this could provide additional lift.
Net, net next Monday has the very real potential to act as a pivotal day for GoPro’s business prospects moving forward and an in-tow GPRO stock.
GoPro Stock Daily Chart
In consulting GoPro stock’s price chart, the strong inclination is to give shares a second chance.
Following March’s undercut double-bottom pattern and all-time-low of $8.62, GPRO has put together a series of higher highs and higher lows indicative of a developing uptrend. The price action has also been strong enough to afford a Golden Cross pattern.
The 50-day simple moving average recently pushed above the 200-day simple moving average for the first time since last September and is another source of technical confirmation for investors.
Fast forward to today and weakness in GoPro stock over the past couple weeks has established a corrective move within the developing uptrend.
Potential support from the 50% retracement level, testing of the fore-mentioned moving averages, as well as an oversold price dip into the lower Bollinger Band offer an attractive, lower-risk spot to pick up shares.
GoPro Stock Bull Call Spread Strategy
Reviewing GoPro stock’s options board, the GPRO December $15 / $18 bull call spread is attractive. Priced for 55 cents, the vertical offers a potential return of $2.45, or nearly 450%, if GPRO can rally above $18 at expiration.
The positioning of the spread also allows for a nice expiration return of about 125% if GoPro stock manages to reclaim its recent high of $16.25. That compares favorably to owning the December $15 call, which priced for $1.07 would be barely showing a profit.
Using the December contract makes sense, as the spread takes advantage of next week’s event, but also positions a bullish investor through the all-important Black Friday and Cyber Monday seasonal sales kick-off in late November and a time when GoPro stock might really take off.
Bottom line, the December vertical offers a nice combination of risk reduction and reward potential without too much flight of fancy required of GoPro stock and possibly is worth a spot in your portfolio.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives 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.
