New Credo Trade Idea Offers Nice Profit Opportunity in Big Tech
This data center company has been on a roll this year but the upside may not be over.
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Credo Technology (CRDO) is a developer of connectivity and product solutions for the data center market. This is right at the heart of the growth happening in technology companies: data center, AI, energy, software and security.
Credo checks all the boxes, and to be sure the stock has had a massive run in 2025. From the lows in April, Credo is up by more than 400%, a staggering amount, but the earnings just keep growing exponentially. Until that ends or slows down significantly, this stock can really move with the rest of big tech.
The chart certainly shows a pattern of higher highs and higher lows. This is our textbook definition of an uptrend. While the recent pattern of lower highs and lower lows could be troublesome, we believe a pullback to the 50-day MA (current level) was enough to burn off some of the excesses that had been building in the stock for months. It appears ready to move higher as it builds a nice foundational base.
The options trade we like here is plain vanilla: a January call that is slightly out of the money, the $150 call. While this call is expensive at $24, about 17% of the price of the stock, it carries with it a large bit of volatility, so the stock can move sharply higher (or lower).
The implied move for January strikes is about $58, so a strong move up to $200-plus would yield us a nice gain here. This is a moderate-sized delta that allows us to stay in the trade a bit longer even if the stock does not move wildly before earnings hit perhaps in early December. There is decent open interest and some active trading in this strike. The second yellow box would be the option to buy. Each call would cost $2,400.
Another way to play it is to lay off some of the risk premium paid and sell the December 175 call for about $12, reducing your risk by 50% (you would sell the same amount of calls for the 175 strike as you would buy the for the 150 call bought). The first yellow box would be the option to sell. Each call sold would be a credit of $1,200.
