Trump Media & Technology (NASDAQ:DJT) attracts a lot of eyeballs. And because of that, DJT stock presents a compelling trading opportunity.
Now, please don’t mistake Trump Media as a long-term investment. It’s incredibly volatile, as Monday’s loss of more than 8% demonstrated. According to a Reuters report, the red ink stemmed from concerns tied to the company’s disclosure of millions of dollars lost earlier this month. Trump Media may also struggle to meet its financial liabilities.
Currently, the market capitalization of DJT stock comes in at $5.08 billion. Notably, on March 27, shares closed at $66.22. However, on Monday, DJT slipped to $37.17, providing relief to short sellers who previously suffered hefty losses.
Still, Trump Media could be due for a temporary swing higher based on its ties to former President Donald Trump. Because this is a trade, not an investment, you do not have to agree with the story here to profit.
A Technical Opening Invites Speculation
As stated earlier, DJT stock suffered a blow on Monday. In turn, its call options have been cheapened, with the near-expiry examples having been deflated substantially. However, it’s arguably likely that shares will soon rebound. It might only be a dead-cat bounce, but that’s exactly what we would be looking for.
Specifically, a technical opening invites speculation into DJT stock. Barchart’s Trader’s Cheat Sheet identifies key support and resistance levels. Filtering for upside barriers based on what the website calls “Pivots” and “Standard Deviation,” Barchart identifies a range of resistance from $38.11 to $46.28.
With the meat of resistance likely to materialize around the $40 level and higher, speculators can gamble on call options with a strike price of $38. From Monday’s close, reaching this threshold will require a 2.23% move up.
Here’s another compelling fact. Since the beginning of this year, the average day-to-day performance of DJT stock was 1.97% up. If bullish speculators receive one good dead-cat bounce, they could potentially secure a quick profit.
Trade of the Day: Buy DJT Stock Near-Expiry Calls
For this morning’s Trade of the Day, we’re going to engage a super-risky idea in the form of the 19 April 2024 $38 call. Yesterday, the volatility in DJT stock saw this call option suffer a 19.44% loss. Cynically, that makes this derivative contract more favorable for us.
In addition, the $38 call features relatively high volume at 165 contracts with elevated open interest at 176 contracts. As a result, the bid-ask spread as represented by the midpoint price (the difference between the bid and ask prices divided by the midpoint price of $3.22) came out to 10.9. That’s very wide in absolute terms, but relative to other DJT stock options, it’s actually reasonable.
To emphasize, we’re looking for a quick in, quick out opportunity. Since the call expires next Friday, time decay is important. If the trade doesn’t work out by the end of this week, you may need to cut your losses and move on. And if you are profitable, you’ll want to bag it and exit before any surprises occur.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
