Trade Alert: Chinese Fintech

Betting on one with strong technicals and fundamentals.

Taking Advantage Of A Down Day

This stock had been on my watch list for a while, and the one piece I was waiting for—price consolidation, as indicated by its Chartmill set-up rating—has fallen into place. The stock beat on both top and bottom lines when it reported last quarter, and here are some of its current metrics:

• Technical rating: 10

• Set-up rating: 8

• Fundamental rating: 7

• Profitability rating: 8

• Health rating: 7

• Growth rating: 7

• Valuation rating: 8

On top of that, it even pays a dividend of close to 5% annually. Not that we’re going to be holding the underlying stock here, but if it’s paying its shareholders money, that inspires a bit more confidence in the fundamentals.

The options market expects a move of about 12% in either direction when this stock reports in November. Our bet here is that that movement is going to be to the upside, and if we’re right, we could make a triple-digit gain.

Details below.

Today’s Bullish Bet

The stock is Qifu Technology (QFIN 0.00%↑), and the trade is buying its $25 strike calls expiring on January 17th, for $2. The max gain on 2 contracts is uncapped, the max loss is $400, and the break even is with QFIN at $27. This trade filled at $2 on 9/10/2024.

Exiting This Trade

There is some uncertainty about when this company is going to report in November—Fidelity says November 15th (which is an options expiration date), but other sites say it could be as late as November 21st. That’s one reason I bought the calls here instead of entering a spread—this way, we can exit after earnings whatever date they land on, without any drag from a short call position expiring two months later.

I’m setting a GTC order to exit these calls at about $6, and will lower that price, as necessary after it releases earnings.