Wall Street Could Be Overpricing the Risk of Coherent Stock Call Spreads

Although Coherent’s (COHR) core business is extremely relevant to artificial intelligence, particularly toward the explosive growth of data centers, the recent performance of COHR stock leaves a lot to be desired. In fact, the equity has dubiously earned a 56% Sell rating from the Barchart Technical Opinion indicator, implying the probability of continued weakness. Still, for contrarians, the red ink could represent a potential opportunity.

Consider for example the 280/290 bull call spread expiring Oct. 16. On the surface, it would seem a reasonable trade with a palatable risk-reward balance. For a net debit (cash outlay) of $490, the speculator can pick up a maximum profit of $510 should COHR stock trigger the $290 second-leg strike price.