A lower-risk trade using options on an AI-derivative play that’s breaking out
Akamai’s low latency edge network servers are uniquely positioned to benefit from the rising demand for AI computing. As industries increasingly rely on real-time AI models, AKAM’s infrastructure offers both speed and security by processing data closer to users. This positions Akamai as a key enabler of AI technologies. Combined with the company’s attractive valuation, it offers substantial upside potential, with the chart showing growing investor interest in its AI-driven opportunities. We’ll describe an options position to bet on further gains in the stock with lower risk. Akamai (AKAM) has formed a classic bottoming formation over the past few months and is now breaking above a major resistance level at $102.50. This breakout is supported with outperformance relative to the S & P 500 and momentum remaining firmly positive. As the stock pushes higher, our upside target is in the $125 range and the technical set-up looks favorable for continued upside. AKAM’s valuation remains attractive relative to the broader technology sector. Trading at only 15 times forward earnings, it’s a significant discount relative to its industry average of nearly 28. While AKAM’s expected EPS growth of 7% lags behind the industry, analysts expected revenue growth of 17%, which is nearly double the industry average of 9%. AI models distributed on AKAM’s extensive edge computing network provide significant upside potential, especially as demand for low-latency AI solutions increases across various industries. To capitalize on this potential breakout setup, I’m suggesting buying a Dec $100/$120 call vertical @ $7.20 Debit. This entails: Buy the Dec 20, 2024 $100 Call @ $8.35 Sell the Dec 20, 2024 $120 Call @ $1.15 View this trade with updated pricing in OptionsPlay here : This call vertical spread offers a maximum potential reward of $1,280 per contract, with a maximum risk of $720, yielding a reward-to-risk ratio of approximately 1.8 times. The trade profits if AKAM trades above $107.20 by expiration. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
#lowerrisk #trade #options #AIderivative #play #breaking