$SHOP Options Intelligence

🎯 BUY SHOP 2025-12-19 160/170 CALL SPREAD

I recommend a bull call spread on Shopify (SHOP) because the term structure shows near-term options are underpriced relative to baseline volatility, creating a good buying opportunity, combined with strong holiday sales despite a recent Cyber Monday outage. The stock is currently at $161.75, above its 50-day and 20-day moving averages, with bullish MACD and neutral RSI, suggesting room for upside. The earnings event is 67 days away, so December 19 expiration (14 days out) avoids earnings risk while capturing potential post-holiday momentum.

Buy SHOP Dec 19 160/170 Call Spread
Stock Price: $161.75 | Entry: Approximately $5.00 debit (Buy 160 call ~ $7.50 ask, Sell 170 call ~ $2.50 bid)

📊 Trade Metrics

• Max Risk: $5.00 per spread (debit paid)
• Max Reward: $5.00 (difference between strikes minus debit)
• Breakeven at Expiry: $165.00 (160 strike + $5 debit)
• Days to Expiration: 14
• Win Probability (Delta-based): Moderate (160 call delta ~0.55, 170 call delta ~0.30)

📈 Term Structure & Volatility Analysis

• Baseline 90-day Historical Volatility: 48.3%
• Clean IV for Dec 19: ~45.7% (under baseline, signaling underpriced premium)
• Market IV Rank: 100% (high overall, but Dec 19 is relatively cheaper than near-term)
• Earnings Multiplier: 2.6x (high expected earnings move, but Dec 19 avoids immediate earnings risk)
• Calendar Opportunity: Yes, favorable to buy Dec 19 calls vs. sell near-term overpriced options expiring Dec 5
• Current IV: 53.1% (elevated but Dec 19 options pricing is attractive relative to baseline)

📈 Greeks & Technicals

• Delta: Net ~0.25 (bullish exposure)
• Theta: Negative but limited due to short duration
• MACD: Bullish (0.45 vs signal -1.05)
• RSI: Neutral (55.74)
• Price above 20-day MA by ~5.8%, above 50-day MA (158.11) and 200-day MA (125.62), supporting bullish bias
• Market sentiment cautious due to Cyber Monday outage but strong sales growth (27% YoY GMV increase) supports upside potential

🎯 Why This Trade

The term structure reveals a buying opportunity as Dec 19 options are priced below the baseline volatility, despite an overall high IV environment. Shopify’s stock is holding above key moving averages with bullish momentum indicators, and the recent Cyber Monday technical outage, while a short-term negative catalyst, is offset by record holiday sales ($14.6B weekend GMV). The trade captures potential upside from post-holiday momentum without exposure to the upcoming earnings on February 10, 2026. The expected daily move (~$5.42) aligns well with this spread's width and breakeven.

📊 Pro Analysis

• Current IV: 53.1% vs Historical: 14.1% (elevated)
• IV Rank: 100% (favors selling premium short-term, but Dec 19 options underpriced vs baseline)
• Put/Call Volume Ratio: 0.74 (neutral sentiment)
• Market Maker Max Pain: $175 (above current price, indicating potential upside)
• Unusual Activity: Elevated volume in Dec 26 175 puts could indicate hedging or directional bets, but not a direct bearish signal for this timeframe

🔍 Earnings Date Check

Earnings on 2026-02-10, recommended expiration Dec 19 is well before earnings, so this trade does NOT capture earnings volatility but benefits from post-holiday seasonal strength and technical momentum.

💡 Trade Management

• Entry: Limit order at $5.00 debit (midpoint between bid/ask for 160 call and 170 call)
• Target: Close at $7.50+ (50%+ profit)
• Stop: Exit if price falls below $155 (technical support breach) or if volatility collapses sharply
• Time Stop: Close 2 days before expiration if target not hit

🔒 Pricing Validation

• 160 Call intrinsic value: $1.75 (161.75 - 160)
• 170 Call intrinsic value: $0 (OTM)
• Spread intrinsic value: $1.75 (160 call ITM - 170 call OTM)
• Spread cost $5.00 > intrinsic $1.75, valid debit spread
• Put-call parity holds within tolerance

🔍 Market Overview

The market is approaching a seasonal holiday breakout with strong consumer spending evidenced by Shopify’s record $14.6B Black Friday-Cyber Monday sales, despite the Cyber Monday outage impacting merchant backend access. Shopify’s fundamentals remain solid, with $1.38 EPS and 16.7% profit margin. The stock trades above all major moving averages, supported by bullish MACD and neutral RSI, suggesting potential for further gains. The sector peers like AMZN and ETSY show mixed signals but holiday season strength is a positive tailwind. The Fed’s upcoming rate decision (Dec 10) may add volatility, but this trade’s short duration limits exposure.

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Confidence Level: Moderate-High
This trade balances good technicals and fundamental holiday strength with a favorable volatility term structure. The risk is limited to the $5 debit, with a defined reward if the stock rises above $170 by Dec 19. The main risk is downside from continued merchant disruption or broader market weakness before expiration.

Risk Assessment:
• Max loss limited to $5 per spread
• Moderate theta decay risk but offset by bullish momentum
• No earnings risk, but sensitive to market-wide volatility shifts around Fed decision

This is a defined-risk, moderately bullish spread designed to capitalize on Shopify’s post-holiday momentum with controlled risk and favorable volatility pricing.