Sanmina Corporation (SANM) provides integrated manufacturing solutions to original equipment manufacturers in a number of different industries. The company’s stock is currently trading around $16.85 in a 52 week range of $7.58-$18.44. The stock has been performing very well this year, outpacing the broader market, rallying over 52% year to date. Unsual options activity in yesterday’s trading session suggests that traders believe this trend in SANM will continue through the end of November. In midafternoon trading yesterday a trader sold 2,500 SANM Nov 16 puts for $0.60. This is a very bullish trade as this trader is accepting large amounts of risk in hopes shares of SANM stay above $16.00 through November expiration. SANM is rallying today on the back of the bullish activity from yesterday. The stock is also trading well on a chart with the Ichimoku Cloud suggesting there could be more upside in store for SANM. We believe that these signals provide a great opportunity for a covered call in SANM.
Trade: Buying 100 shares of SANM stock at $16.85 for every Nov 16 call sold for $1.75
Reward: $90 per 1 lot
Breakeven: $15.10
If SANM is above $16.00 on November expiration this trade will net its maximum potential profit of $90 per 1 lot. This trade will also net some profit anywhere above $15.10. Should the stock close above $16.00 on November expiration this trade will net an annualized return of 175.2%
