We have a New Trade for our Weekly Wrap on a stock we feel can double over the next 6-12 months.
Shares are currently at $8.34 and the 52-week high is $10. The stock also trades options so we are going to sell near-term call options to lower our cost basis. We are also buying LEAPs (longer-term options) to play the move past double-digits.
The LEAPs we are recommending are trading for 75 cents and the breakeven point is for the stock to be at is $10.75 by next March 2014. If the stock is at $12, the options will be worth at least $2 and the return would be 167%. If shares reach $13, the options would be worth $3 for a return of 300%. If shares reach our $15 price target by then, the options would be worth at least $5 for a 567% return.
This means a $75 investment on one contract could be worth a nickel ($500) in Vegas slang, or $750 on 10 contracts will get you a cool $5,000. We love the odds and even on a run to $12 we would be extremely happy. We just wanted to show the potential this trade really has.
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