You can see the stock gapped and then stalled as the highs for the last 5 days stayed around the same level around $100.
Going out to the 16 SEPT expiration, we can set up a credit spread, selling the $105 call (above resistance) and buying the $110 call. This is a trade that assumes FSLR won’t trade above $105 by 16 SEPT. The sold strike is over 5% from the current price and gives us some room even if the stock does edge up a little more.
Sell to open $105 SEPT 16 CALL
Buy to open $110 SEPT 16 CALL
Credit received: $154 per spread
Buying Power Required: $347 per spread
Max Profit = 154 / 347 = 44% ROI
I like exits at 50% of the credit received.
Exit: If the stock closes above $105, get out.
At the time of writing, that gives you a max loss of $68. If you exit at a 50% potential profit of $77 and a potential loss of $68 if you sell at the short strike, you have a better than 1:1 reward to risk ratio.
Have a great weekend, everyone!
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