Following a key business collaboration, Spotify (NYSE:SPOT) shares continue to lay down a slow and steady track on the price chart for bullish investors. But to avoid any potential discord in the near term, a harmonious and bullish spread combination sounds perfect for getting long SPOT stock today. Let me explain.
Spotify stock may not be the next so-called perfect investment. That’s okay, though, as that sort of thing is overrated. Besides, a recent earnings beat and an announced partnership with Samsung (OTCMKTS:SSNLF) have been music to the ears of Wall Street. And that’s a trend that looks good to continue on.
The latter business relationship allows Spotify to become the “go-to music service provider” for the South Korean electronics giant. As much, it puts the music upstart in position to be more ubiquitous in its access for subscribers — and challenge Apple (NASDAQ:AAPL) and other formidable competition like Amazon (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL).
Now and with shares having struck a pleasant chord with investors on the heels of both reports, bullish options traders have a slow and steady track on the Spotify price chart that’s worth subscribing too.
SPOT Stock Daily Chart
By some standards, this stock has been a grind. Technically speaking, it’s also been a slow and steady track that’s established higher highs and lows and enriched bullish investors in the process.
Some investors might reasonably ask the question, “When will the music stop?” This market strategist’s response would be a failure to notch a new high or the stock failing to hold the current trend-line support near $180 is easy enough to appreciate. And if you’re an options trader, it’s also simple enough to lay down a harmonious and limited risk spread in tune with the current friendly price trend.
SPOT Stock Bullish Combination
After reviewing the options market in SPOT stock, I like the idea of combining an above-market, moderately bullish long call butterfly spread with an out-of-the-money put credit spread to finance the position.
In keeping with the technical picture in Spotify, buying the Sept $200/$210/$220 call butterfly and selling the Sept $185/$180 put spread is priced for even money, with shares at $193.70 and looks attractive.
On the downside, and in the event there’s some technical discord with SPOT stock bulls, this trader is protected. Stock exposure is limited to the $5 put spread if shares of Spotify fall below $180 and our determined chart support.
On a more pleasant note, if it continues to strike the right chord and rallies to new highs, this spread will be immediately profitable. As the butterfly is essentially a free position, this trader can capture some sort of profit at expiration in-between $200 to $220. This trader can also enjoy as much as $10.00 in profit if the stock lands squarely on $210 on the third Friday in September.
Of course, taking in the max payout at $210 in SPOT stock is unlikely to happen. Ultimately, the factors of time and price would need to cooperate perfectly and that’s a low probability event. But in an imperfect investing environment, this combined spread still sounds and looks quite good.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities 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 and StockTwits.