I�m sure you would attest to the fact that trading can be very difficult at times. Sometimes option traders can lose their way and have trouble figuring out how to get back on track. Here is a trade idea that might navigate them back to where they want to be.
Garmin (NASDAQ:GRMN) is synonymous with global positioning systems. The stock is up over 23% year-to date and has recently reached a new 52-week high. The demand for standalone GPS systems may be waning, but the company continues to develop new projects like apps for the iPad 2.
Technically, the stock has been on a slow rise form the beginning of October and, as mentioned above, set a new high. The stock is approaching a high it set back in March 2010, which was $40.47. Right now it looks like GRMN can map out the way to the land of profitability. Here�s how you can play it�
The trade: �Buy the GRMN Feb 40 Calls for $1.45 or less.
The strategy: The long call strategy is relatively straightforward. The trade profits when the stock rises and the call premium increases as the GRMN option moves more and more in-the-money (ITM).
Maximum profit is unlimited because GRMN can continue to rise and the maximum loss is $1.45 if GRMN finishes below $40 at February expiration. Consider entering this trade idea if the stock can trade over and hold that area.
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