MELI Stock: Could This Unbalanced Iron Condor Return 25%? | IBD

TL;DR

An analysis of a bullish iron condor options strategy for Argentine e-commerce company Mercado Libre, highlighting its recent stock performance and use of support lines and strong ratings to generate a slightly bullish bias.

Transcript

foreign ERS for today's trade we're looking at an option play in Argentine e-commerce company Mercado Libre so taking a look at the stock on Market Smith shares recently scored a breakout from a 1095-44 buy point the stock became extended but round-tripped those gains shortly after however support at the 21 Day line has helped the stock regain its ... Read More

Key Insights

• 📶 Mercado Libre's stock recently experienced a breakout but retraced its gains before regaining strength.
• 💯 The stock has a perfect 99 composite rating and other strong IBD ratings.
• 🛀 The retail internet group, of which Mercado Libre is a part, is showing strength.
• 🙂 The iron condor options strategy is being used with a slightly bullish bias by widening the put spread.
• 🧑‍🤝‍🧑 Specific strike prices and expiration dates are used in the options trade.
• ✋ The trade has a potential return of 25% and a calculated stop loss based on 25% of the capital at risk.
• 🤑 It is important to practice with a virtual account before risking real money in options trading.

Questions & Answers

Q: What is the current status of Mercado Libre's stock?

Mercado Libre's stock recently broke out from a buy point but later retraced its gains. However, it has regained strength after a solid earnings report and is rising again in heavy volume.

Q: What is the iron condor strategy?

An iron condor is an options strategy made up of a bull put spread and a bear call spread. It is generally directionally neutral, but in this case, the put spread is slightly wider than the call spread to give the trade a slightly bullish bias.

Q: What are the strike prices and expiration dates for the options trade?

For all legs of the trade, the March 17th expiration is used. The put spread involves buying the 1030 put and selling the 1050 put, while the call spread involves selling the 1290 call and buying the 1300 call.

Q: What is the potential profit and risk of this iron condor trade?

The trade should collect around $4.05 per contract, with a potential return of 25%. The Profit Zone ranges between $1045.95 and $1294.05. The maximum risk is $1595 on the put side and $595 on the call side.

Summary & Key Takeaways

• Mercado Libre recently broke out from a buy point and regained strength after an earnings report.

• The stock has strong IBD ratings and is part of a retail internet group showing strength.

• Using an iron condor strategy, investors can trade with a slightly bullish bias by widening the put spread and setting specific expiration dates and strike prices.