Riverbed Technology (RVBD) Trade Idea
Buy (RVBD) Feb. $20/$21 Call Spread for $0.50 or better
Stop loss- $0.30 (GTC order)
Trade Description: Riverbed Technology (RVBD) has been moving higher in a well defined uptrend, since late November. The most recent pullback in the stock is giving us an opportunity to trade from the long side (a buyer) with relatively low risk. Instead of buying the February $19 or $20 call, which are expensive. We are buying the Feb. $20/$21 call spread for about half of the $1 spread ($21-$20=$1). The $0.45-$0.50 cost of buying one spread is roughly a third of what buying a Feb. $20 call is currently trading for. We are setting an initial stop loss at $0.30 in case the stock moves against us.
Remember that when you buy a call spread, you are buying the lower strike call ($20 call) and simultaniously selling the higher strike call ($21 call) for a net debit. This is all done in one order in your brokerage account.