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At Strategic Trader, we have been managing a position in the iRobot Corporation (NASDAQ:IRBT) since mid-September. And we’ve used various option-selling strategies to earn extra income from this position along the way.
In the latest positive development for the company, the robotic vacuum-maker’s stock jumped higher following news that it would be working with Alphabet (NASDAQ:GOOGL) to expand their partnership.
GOOGL wants access to the “spatial awareness” data that IRBT’s devices use to execute their functions.
Access to better data about the home environment will give GOOGL and IRBT a competitive advantage over Amazon (NASDAQ:AMZN) in the home-automation space.
If we set privacy concerns aside, this could be a game-changer for IRBT’s business.
For example, imagine a Google Home user who can change lighting, heating/cooling and security settings through a system that understands where the user is located in the home.
It seems like a subtle shift, but understanding the context around a user’s instructions is important for automation systems to reach broader adoption.
From a technical perspective, we still like IRBT, but we don’t think the market is through the woods yet.
The major indexes are likely to still hit a few snags before heading higher, which might make it difficult for IRBT to break resistance near the $94 level in the short term.
Daily Chart of iRobot (IRBT) — Chart Source: TradingView
Option premiums are very high right now as investors wait for holiday sales results, so we want to take advantage of this opportunity to sell some call premium — especially if the stock continues to channel in its current range.
We expect the market to continue trading back and forth as investors wait for the outcome from the meeting between President Trump and China’s President Xi at the G-20 summit. If trade talks turn more positive, we expect stocks like IRBT to benefit.
However, any long-term resolution will likely take us out past the end of the year, which means the upside is probably limited in the short term. Therefore, we plan to continue selling calls against the stock while it remains range-bound.
To find out which calls we’re selling and see exactly how we are trading this situation — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today.
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 Strategic Trader.
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