Wingstop Stock Up 164% Over The Past Year; How To Play The Upside As Shares Near Buy Point | IBD

TL;DR

Take advantage of Wingstop's potential upward momentum with a risk-defined bullish trade known as a bull put spread.

Transcript

foreign ERS it's Rachel here with your option of the day for Monday April 17th for today's trade we're looking at a bull put spread in restaurant franchise Wing Stop So taking a look at the stock on Market Smith Wingstop has been on a powerful run higher since June of 2022 Rising 164 percent over the past 11 months the stock has formed and broken o... Read More

Key Insights

• 📈 Wingstop has experienced a significant upward trend, rising 164% in the past 11 months.
• 😥 The stock is currently forming a consolidation with a buy point at $193.84.
• ✋ Wingstop has high IBD ratings, indicating its strong financial health and accelerating earnings growth.
• 🚄 The suggested bull put spread trade generates a premium of $155 with a maximum risk of $345.
• 😥 The break-even point for the trade is $163.45.
• 🌸 It is important for the stock to stay above the support level around $178.50 to avoid losses.
• 🌸 Setting a stop loss level at $172 and limiting the loss to the received premium can help minimize potential losses.

Questions & Answers

Q: What is a bull put spread?

A bull put spread is a risk-defined strategy in options trading that involves selling one put and buying a lower strike put, aiming for the stock to remain above the higher strike price to keep the full premium.

Q: What is the maximum loss in this bull put spread trade?

The maximum loss would occur if Wingstop closes below $160 on May 19th, resulting in a loss of $345 for the premium seller.

Q: What is the break-even point for this trade?

The break-even point is calculated to be $163.45 by subtracting the option premium per spread from the higher strike price of $165.

Q: What is the suggested stop loss level for this trade?

A stop loss level of $172 is recommended in case Wingstop drops below that price, helping to limit potential losses.

Summary & Key Takeaways

• Wingstop has been on a powerful upward trend, rising 164% in the past 11 months and currently forming a consolidation with a buy point at $193.84.

• As per its IBD ratings, Wingstop is in top shape with high EPS, composite, and RS ratings, along with accelerating earnings growth.

• The suggested trade involves selling a 165 strike put and buying a 160 strike put, generating around $155 premium with a maximum risk of $345.