London – 17/06/2022

Although the market seems to have a lot of downside ahead of it, some value plays have emerged. For the not faint-hearted traders , there is an opportunity to use LEAPS (long dated options) for leverage in order to achieve great returns but at the great risk of loosing their capital.
Such an opportunity is the buying of STNE (StoneCo) a Brazilian fintech company with a lot of growth & acual profits. The stock which a couple of weeks ago went from 9 USD to 12.5+ USD due to its excellent quarter results but has been punished since & followed the overall markets downtrend.
The raise of interest rates due to the persistent inflation seems it will stay for some longer than expected  & a possible recession is facing investors & traders.
This has hit especially all the fintech sector & probably will continue to do so in the near future.
But If we assume that the world will not end & a recession if comes will last 12-18 months the most,  then we have an opportunity to buy an excellent company at a decent to cheap price.
In particular we like the following trade :
BUY STNE calls with strike price of 5 & expiration day of 19th January of 2024 (582 days to expire) at the price of 4.6 per contract (460 USD per 100 shares).
Scenarios at expiration :
If it goes below 5 we lose our invested capital
If it goes above 9.6 USD we start profiting
If its stays at current price (7.7 USD) we lose 1.9 USD per share.
We have a target of 18 USD in the next 1 year & 22+ USD after 1 year If we assume a market no worse than 10% from these levels.

DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs

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