Radware Ltd. (RDWR) develops and markets networking solutions to enterprises. The company’s stock is currently trading around $16.90 in a 52 week range of $13.42-$19.33. The stock has been underperforming the market most of the year having only added 2.6% to share prices year to date. Recent action in RDWR has been much more positive however with the stock rallying nearly 20% in the past month. Options action in RDWR during today’s session indicates that traders believe this near term trend will continue. Early this morning a trader sold 1,324 Jun 17 puts for $1.50, a block that represents over 2.5 times the average daily option volume in RDWR. This is an extremely bullish trade that indicates this trader’s strong belief that the stock will close above $17.00 on June expiration. The stock looks good on a chart as well. Shares are trading well above the Ichimoku Cloud and the future cloud is upward sloping suggesting there could be more upside in RDWR to come. With stock trading just below the strike we believe this unusual option activity provides a great signal for a covered call trade in RDWR.
Trade: Buying 100 Shares of RDWR at $16.92 for every Jun 17 Call Sold for $1.65
Reward: $173 per 1 lot
Breakeven: $15.27
Should shares of RDWR close above $17.00 on June expiration this trade will net its maximum potential profit of $173 per 1 lot. This trade will also net some profit anywhere above $15.27. If RDWR stock closes above $17.00 on expiration this trade will net an annualized return of 21%.
