PLUG is a hydrogen fuel cell provider based outside of Albany, NY. The company reported earnings on Tuesday (June 22) after a delay due to some accounting issues. While earnings missed the mark, PLUG’s strong current and projected revenue growth is considered more indicative of the company’s potential. The company also has a strong cash position on its balance sheet. Wall Street generally approved of the numbers, as several analysts raised their price targets.
After a 75% plunge from late January through early May, the stock has been on the rebound, gaining more than 70%. The recent strength has caused the 50-day moving average (blue line below) to turn higher for the first time in three months. Also in play is the rising 200-day moving average (red line below), which sits at $32.50. This trade relies on PLUG staying above the $30 level through the end of July, so support at the 200-day is critical.
If you agree that PLUG will ride higher along its 200-day moving average, consider the following trade that relies on the stock remaining above $30 through expiration in five weeks.
to Open PLUG 30Jul 27 put (PLUG210730P27)
Sell to Open PLUG 30Jul 30 put (PLUG210730P30) for a credit of $0.95 (selling a vertical)
This credit is $0.06 less than the mid-point of the option spread when PLUG was trading just below $32. Unless the stock rallies quickly from here, you should be able to get close to this amount.
Your commission on this trade will be only $1.30 per spread. Each spread would then yield $93.70. This trade reduces your buying power by $300 and makes your net investment $206.30 ($300 – $93.70). If PLUG closes above $30 on July 30, both options will expire worthless and your return on the spread would be 45% ($93.70 / $206.30).