Seasonality suggests that the bullish price action we’ve seen lately is likely to continue into the last week of July.
That sets us up perfectly for a low-risk, high-reward option play.
The trade in question is a long call in fintech company SoFi Technologies (NASDAQ:SOFI). This is a very short-term trade leaning into the seasonality of July. Once August is upon us, the seasonality of this trade will taper sideways into negative price behavior.
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Eye On Expiration Date
Please note the expiration of this quick trade. Option positioning is currently very bullish in the chains with more than 45,000 contracts positioned between the $20 and $22.50 strike price. SOFI’s relative resistance zone is around $22.5, while support sits near $18.50.
With that in mind, here’s the trade:
- Buy to open SOFI 25 Jul (weekly) $19 calls currently priced at $1.55.
The breakeven price of the stock at expiration on this trade is calculated by adding the debit to the strike price = $19 + $1.55 =$20.55 plus commissions. The implied volatility move is showing a target around $22.50.
The three main possible ways to leave the trade include:
- Hold the option until the July 25 expiration date. If the price of the stock is above $19.50, the trader will relinquish the stock and can sell it at the current market price (not my first choice).
- Set an alert for $22. Sell the option at the time the stock is priced at $22, regardless of the time the price is triggered.
- Set a risk threshold for this option cost. I normally use 50% but this is a personal decision. Once the option cost falls below $0.80, it is advisable to sell.
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