Trade Alert: Returning To A Recent Winner
A bullish bet on a company building new power capacity for AI infrastructure.
A Second Bite At A Prior Winner
The market ripped higher yesterday, but the jury is still out on whether that was just an oversold bounce or the start of something more durable. And with President Trump set to give a major speech on Iran tonight, there is still plenty of uncertainty hanging over this tape. So we’re staying selective in adding long exposure here rather than buying indiscriminately.
Today’s trade is in a name we know well, because it was already a big winner for us earlier this year. When we first traded it back in November, the stock was so depressed that we used a risk-reversal structure partly because there wasn’t really a market for the in-the-money puts we would normally have used to define the downside. We exited part of that trade for a gain of more than 400% earlier this month. But a big move by itself is not a reason to avoid a stock if the story has kept improving underneath it.
Why Add Another Here?
That is the case here. Since our first trade, the company’s core story has been further validated in a way that helps explain why the stock is up so much. This is not a case of irrational exuberance levitating a weak business. It is a case of a market re-pricing a company whose role in the buildout of new power capacity for AI infrastructure has become more credible and more concrete. In other words, the stock’s rise appears to have been driven by improving fundamentals and validation of the thesis, not just by momentum for its own sake.
And that matters, because our technical screens are not just there to keep us from buying falling knives. They are also there to keep us from chasing names that have become overextended. A stock can climb 200% in a few months and still not be overextended if the move has been orderly enough and the setup is still constructive. In this case, that is what our screens are telling us. The stock still passes our RSI and Chartmill Setup filters, which is one reason we’re comfortable taking another shot at it here.
Still Aiming Beyond The War
More broadly, this still fits the way we’ve been thinking about this market. We continue to think the war is more likely to be wrapped up by May than to drag on indefinitely, and we’re aiming our bullish exposure several months beyond that, with the idea that by the time these options expire, we’ll be on the other side of this conflict. That doesn’t mean there won’t be more violent swings along the way. It does mean we’re still looking for selective ways to position for the upside that could follow once this war is behind us.
And in this case, those swings can work in our favor. The options structure we’re using today is designed to harvest some of the elevated implied volatility created by this unstable tape while still giving us bullish exposure into the summer.
Today’s Market Watchers Trade
Power capacity / AI infrastructure theme
