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Sky-High Priceline Group (PCLN) Stock Can Still Book You Free Profits

PCLN stock hit record highs on Tuesday, but I can still profit by selling risk


I always say that Priceline Group Inc (NASDAQ:PCLN) is the poster child for all momentum stocks. Today, PCLN stock is up 6% on a favorable earnings reaction.

Priceline Group (PCLN) Stock Can Still Book You Free Profits

This wouldn’t be the first time Priceline moves this much in one day, and it certainly won’t be the last.

Today, I’ll set a mid-term trade that should profit from a range in PCLN’s stock price.

Before you send in the posse after me, understand that I’m not shorting Priceline stock. I believe in its fundamentals long-term. I’m just finding a range within which I think PCLN will trade through fall of this year.

How to Trade PCLN Stock Here

The short: Sell the Oct $1,990/$2,000 credit call spread. This is a bearish trade for which I collect $2.5 per contract to open. This is my maximum profit. The 14% price buffer gives me an 80% theoretical chance of success. If Priceline stock stays below my sold spread, the trade would yield 30% on money risked.

I am not crazy (you’ll have to take my word for it), so I have to balance this trade out. So I will sell opposing bullish risk in PCLN.

PCLN stock chart view 1
Click to Enlarge

The hedge: Sell the Oct $1,480/$1,470 credit put spread. This is a bullish trade for which I collect an additional $2.50 per contract to open. This side has a 90% theoretical chance of success. And if this side is successful, it would yield its own 30% on money risked. If PCLN stock continues its upward move, I would skew this iron condor to be two longs to one short so I can mitigate the upside risk.

By taking both sides even, I would then have sold an iron condor and collected a total of $5 per contract. And since I can only lose on one side or the other, if PCLN stock stays between both spreads sold, I would collect 100% yield on risk.

The price buffer for this iron condor is +/-14%, but with Priceline, I expect that I would need to manage the risk at some point.

I am not required to hold any trades open through expiration. I can close any of them for partial gains or losses.

Nicolas Chahine is the managing director of As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.

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