Options Traders Just Cashed In on CREE Stock's Incredible Rally

Our bullish recommendation on CREE shares was perfectly timed to capture the stock's bounce

Deputy Editor
Apr 4, 2019 at 4:12 PM
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Subscribers to Schaeffer's Weekly Options Countdown options recommendation service just doubled their money in only a few trading days with the Cree Inc (NASDAQ:CREE) weekly 4/5 55.50-strike call. Here's a quick look at why we expected a big upside move from the semiconductor concern this week, and how the profitable options trade unfolded.

At the time of our initial recommendation this past Sunday, March 31, Cree shares were up an impressive 34% in 2019, despite a recent pullback from the highs they achieved after selling a business unit. Plus, support from the $55 level helped cushion this period of consolidation as the stock worked off overbought readings.

The $55 level was where CREE was trading before its latest spike. We suspected that this area, which is also home to its 20-day moving average, could serve as a springboard in the short term. A short squeeze was a potential catalyst higher, too, as short interest accounted for 10 times the security's average daily trading volume.

Short-term options on Cree were attractively priced when we recommended the trade. The security's Schaeffer's Volatility Index (SVI) of 32% registered in the 7th percentile of its 12-month range.

In the wake of our recommendation to subscribers on Sunday night, CREE stock started the week strong with a 4.3% rally by Monday's close. The bullish momentum continued on Tuesday with a 1.2% advance, and CREE's opening gap higher on Wednesday was sufficient to push our weekly option to its target profit of 100% -- just barely two days after subscribers entered the trade.  

CREE Apr 4

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