Options Trade Of The Day: With NIO stock price set for pop, buy NIO $45 call for October 29

  • NIO stock looks set to pop if it can break $36.78.
  • The electric vehicle maker has been beaten up lately.
  • NIO still has a strong rating from Wall Street analysts.

NIO remains one of our favoured stocks with the potential for a decent pop in our opinion. A combination of factors has led to the stock price falling sharply from highs above $65 back in early 2021 to the current price of $36.24 – near 50% fall. Yes, the stock had a stellar 2020, but so far headwinds have stopped the stock in its tracks. First, it was the semiconductor chip shortages and then the Chinese tech crackdown. 

However, we see some signs that NIO may have bottomed out. Calling the bottom is always a dangerous game, much easier to try and follow the trend. If you can catch the bottom, or near it, the rewards can be greater though. Using an options strategy has the benefit of built-in risk management, assuming you are buying options. We do not recommend selling or writing options. This is high risk with unlimited losses. 

NIO stock news

NIO gapped up on October 7 on the back of a strong report from Goldman Sachs, who upgraded the stock to a Buy and gave it a $56 price target. "We believe Nio provides the visibility of strong volume expansion in the next six months, driven by the upcoming ET7 (China's priciest car model launched by a domestic brand), the Nio Day 2021 in Suzhou, the accelerating BAAS build-out, and the entrance into Norway." Importantly, since this strong move, NIO has consolidated those gains and looks set to be preparing for another move higher. Breaking $36.78 should see more momentum players enter NIO. 

NIO stock forecast

The Relative Strength Index (RSI) broke the lower trend line and is aiming to get above 50, giving it a slightly more bullish tone. The Moving Average Convergence Divergence (MACD) has crossed into a bullish signal, and NIO is above the 9-day moving average. There is a bit of volume traffic to get through on the way to $40, but above that level the volume drops off, meaning gains should be easier. 

We have picked the $45 call for two weeks expiry on October 29. This closed yesterday at just $0.08 per share, so a small outlay. When picking a strike it is not necessary that NIO gets through $45 before October 29. A strong price move will see the value of the option increase even if the strike is not broken. A strong price move should also see volatility rise. We also like the $42 calls for a week earlier expiry on October 22. These cost $0.09 at yesterday's close. Thursday saw decent volume in the $40 calls for October 29.

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