Today, I would like to make a suggestion on a debit spread and on a stock we traded in the past.
That stock is Cloudflare Inc. (NET).
The last time I suggested NET, the trade was structured as a cover call.
This time, it will be a different structure that ties up less cash.
And that is with the debit spread.
NET is trading around $18 as I write this.
My suggestion is this:
Buy to Open the February $17.50 call for $1.45
Sell to Open the February $20.00 call for $0.55
The net debit will be $0.90 per spread. The maximum gain would be $1.60 if NET will trade above $20 by February 21st.
The maximum return would be 178%.
Limit the buy in to 6 spreads based on the nominal portfolio. This is a risk of 0.5% of the total portfolio. Suggested position size is reduced because of the recent market action.
