Call Spreads and Collars on Akamai Technologies (AKAM)

Mad About Options takes a look at the stocks getting coverage from Jim Cramer, Fast Money casts and other heavy hitters in the financial press and reviews strategies option traders might have used if they agree or disagree with these assessments of the underlying stocks.

The Pick – Akamai Technologies (AKAM):

On Jan. 4, Mad Money host Jim Cramer endorsed AKAM as a “high-quality play” on the exponential growth of the mobile Web. AKAM shares were trading at $26.30 at the time of Cramer’s report.

BULLISH Option Trading Idea for AKAM:

Bull call spreads –

• Buy two May 15-25 call spreads for $8 each

Maximum risk: $16 plus commissions

Maximum potential profit: $4 minus commissions

Breakeven: The strategy will be profitable if AKAM shares are trading higher than $23 at May expiration.

BEARISH Option Trading Idea for AKAM:

Collar with a call spread –

• Buy February 25 puts for $1.10
• Sell February 27-35 call spreads for $1.20
• Net credit of 10 cents

Maximum risk: $7.90 plus commissions

Maximum potential profit: $25.10 minus commissions

Breakeven: The strategy will be profitable if AKAM shares are trading lower than 27.10 at February expiration.

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