The latest move up in the stock market shows general upside as we continue to sit in the power trend defined by Investors.com. Finding the best of the best remains difficult, with so many stocks rising. Selecting a name such as Credo Technology Group isolates some of the best characteristics we look for; thus, let's view a leap covered call in Credo Tech stock.
The leap covered call refers to an option position that lasts well into the future, customarily one year or more. Our trade today is going to expire in June 2026.
Credo Tech stock has done well since it cleared a cup with handle. Credo furnished an 80.99 proper buy point. The stock holds an enviable 98 Relative Strength Rating.
Selling the call option well into the future allows the trader to hold Credo Tech stock at a discount. If the stock continues to rise, the call option can be covered. Then, a new option opened against the stock (commonly called rolling the strike) continues the process.
The strategy here? Both hold the stock and collect more revenue as time moves forward and Credo Tech stock continues to climb.
If Credo Tech stock fades, we have a solid cushion of profit the short call provides.
Stock Market Outlook For The Next 6 Months
Credo Tech Stock: The Trade
Let's set it up:
- Buy 100 shares of Credo stock, which recently traded at 92.20
- Sell to open one CRDO June 18, 2026, 105-strike call, priced recently at $23.10
A 100-share position would allocate $9,220 to Credo Tech stock. Selling of the call would deliver a credit of $2,310. This represents income generation if the stock holds steady. But should the stock rise as noted in the explanation, we could roll the call to a higher strike further out in time and collect even more revenue, all the while holding onto the stock.
Calculate the breakeven prices of the stock at expiration on this trade by subtracting the credit received against the cost of the stock = $9,220−$2,310=$6,910, less commissions. This implies the actual cost of each share would be reduced to $69.10, representing a 25% discount.
Key Chart Levels
Keep in mind that the relative resistance zone is an approximate price. Why? First, we are cresting to new highs. However, a Fibonacci-style technical price-level extension shows 110 as a key area to watch. Meanwhile, support sits near 61, or the high of the largest-volume candle of the 2025 trading year so far.
Possible ways to leave the trade include holding both Credo Tech stock and the option until the option expires in June 2026. If the price of Credo Tech stock rises above 105, the trader will relinquish the stock at that price and then collects the difference between the actual cost of the shares ($69.10) and the $105 strike price. We get $105 - $69.10 = $35.90, or $3,590 per option contract, less commissions for a 51% return.
Consider setting an alert for 69.10, the breakeven price. Sell the entire position if your risk thresholds are breached. The bullish trader might say, "Shouldn't I sell the call much further out of the money if I am bullish on the stock?" Yes. However, if the market has any retracements of importance, selling the strike at the money provides a tidy cushion of support while still buying the stock for potential upside.
Anne-Marie Baiynd is a 25-year veteran trader of stocks, options and futures and is the author of "The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology." You can find her on X at @AnneMarieTrades and on the IBD platform.
