In June we checked in on Comcast (CMCSA). The stock was down significantly in 2018 amidst uncertainty around M&A activity for itself and its competitors. But with that 27% decline from all time highs (at the time) the stock seemed to have found technical support and was also getting cheap (12x expected earns). It set up well for a contrarian defined risk bullish trade idea. Here’s what we detailed, from June 11th:
CMCSA ($32) Buy Aug 32.50 / 37.50 Call Spread for $1.10
-Buy to open 1 Aug 32.50 call for 1.35
-Sell to open 1 Aug 37.50 call at 25 cents
The company reported mixed results this morning but showed some strength in high speed internet adds. The stock is up 4% on the day. With the stock 34.75, the Aug call spread is worth about 2.20 versus the initial 1.10 risked, so about a double. Intrinsically it is worth about the same so there’s no premium risk from here on out, it will simply trade like stock but with defined risk.
As far as trade management, it’s basically a directional call at this point. $35 is resistance but if the stock were able to get above that it has some room and this could turn into an even better one.
But should the stock fail to get above 35 it’s best to keep a stop on the trade below to not lose current profits.