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Trade of the Day: Zynga (ZNGA)

Undervalued call options minimize your risk


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I’m seeing a mixed bag in Internet stocks, with some clear winners and clear losers. Time Warner (NYSE:TWX) and Google (NASDAQ:GOOG) are excellent buys right now, while Amazon (NASDAQ:AMZN) is trending down.

In this overbought market, the bulls are preparing to take a rest, and many call options are trading at enticing prices. My preference is to go for these undervalued options with underlying stocks that have a good chance of spiking up. While some Internet stocks are already strong and likely have only downside left, Zynga (NASDAQ:ZNGA) appears to have some steam left that could be very profitable  before this April.

Recommendation: Buy ZNGA April 3 call options at 53 cents or lower, when the stock price is around $3.30. After entry, take profits if the stock price hits $3.80 or the option price reaches 90 cents. Exit if the stock price closes below $3.00 or the option price falls to 40 cents.

Paying the correct price is critical. Do not pay more than the recommended price.

If possible pay less than the recommended value. By doing so you’ll save money and make more.

By paying only the fair and recommended price or lower, you keep your losses low and maximize your profits — something I am sure you want.

Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.

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