Amid the market turmoil, one stock which has been ever so stealthily marching
higher is Green Mountain Coffee Roasters (NASDAQ: GMCR ). As it approaches
overhead resistance, this stock looks amped up and ready to surge into new
territory. What makes a breakout setup so appealing is the likelihood of
follow-through. More often than not, when a stock rises to new highs it attracts
a notable amount of fresh capital which results in further upside pressure in
the stock. While GMCR trades upwards of 2.5 million shares a day, offering
sufficient liquidity for stock traders of all stripes, the options aren't as
liquid as one would hope. Remember: tight bid-ask spreads make the life of an
option trader much easier. When faced with options of a more illiquid nature,
traders have two choices: First, they can simply stick to the underlying and buy
stock to express their bullish outlook. Second, they can trade the options
anyway but focus on using limit orders in an attempt to split the bid-ask spread
and achieve a more palatable fill. One play worth consideration is the simple
purchase of an Oct 110 call option if GMCR is able to break above the $110-$111
threshold. It sets up a limit risk and unlimited reward profile that will profit
if GMCR continues to rise in coming weeks. Source: MachTrader At the time of
this writing, Tyler Craig had no positions in GMCR.
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