Swing Long on the BA Breakout

[Steven Place]

Potential compression breakout in BA. Measured move gives us a target of around 112.50.

Now there is some news risk around BA, as it is a defense contractor, so Syrian intervention by the US Gov’t may prove fruitful – although the past 6 month runup may already have investors anticipating that move.

I think you can buy calls straight up but a slightly clever way to play this would be through a bull call spread:

So the good thing about bull call spreads is:

• there isn’t a ton of theta risk initially
• if you’re completely wrong on the breakout call, then you can stop out with less risk than a long call
• if the stock pulls back and you still like the trade, then you can close out the short call and you can get back to breakeven faster

If the stock loses 102.50 then I would look to exit the trade– but if it pulls into 103 then I would buy back the 115 call and leave the 105 call on.

 

 

[Steven Place]

BA broke out and has greatly surpassed expected targets. This has gone a bit parabolic, and the way we structured our risk, we are near max profit with around a month left. This is where you should reduce position and trail a stop.

[Author]

Posts