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Put Spread on GOGO on 11/22/2013

Double Top on GOGOGogo Inc. (GOGO) provides in-flight Internet connectivity and wireless in-cabin digital entertainment solutions in the United States and internationally.

The company operates through Commercial Aviation and Business Aviation segments. The Commercial Aviation segment offers ‘Gogo’ branded in-flight connectivity and wireless digital entertainment solutions to commercial airline passengers in the continental United States, including Alaska through its network of cell towers, airborne equipment, and air-to-ground spectrum.

The Business Aviation segment provides equipment for in-flight connectivity with voice and data services to the business aviation market. Its services comprise Gogo Biz, its in-flight broadband service, and satellite-based voice and data services through strategic alliances with satellite companies. This segment serves business aircraft manufacturers, owners, and operators, as well as government and military entities.

The company offers a suite of connectivity solutions and other services, including passenger connectivity, passenger entertainment, in-flight portal, and operations-oriented communications services. As of December 31, 2012, it had 1,811 commercial aircraft online. 

Shares of this recent IPO have moved higher on prospects of FCC allowing cell phone use on board flights. It appears that shares are forming a "double top." Note that shares were downgraded this morning.

JPMorgan downgraded Gogo (GOGO) from Overweight to Neutral with a price target of $28.00. Analyst Philip Cusick thinks upcoming, large lockup explorations could pressure the stock. 67% of outstanding shares will be freed up for sale when lockups expire on December 17th. In addition, Cusick thinks JetBlue's launch of Wi-Fi service could worry investors.

Trading Range Since IPO in Sep: $9.71 - $31.55

Last Trade: $29.00   

 

Trade

  • Buy 1 December $30.00 Put at $3.25
  • Sell 1 December $25.00 Put at $1.15
  • For a net debit of $2.10

Profit/Loss Analysis

  • Breakeven at $27.90
  • Maximum profit is $290.00 at strike of $25.00
  • Maximum loss is ($210.00) at strike of $30.00

Closing Summary

  • Sold 1 December $30.00 Put at $4.60
  • Bought 1 December $25.00 Put at $1.60

Position closed on 11/26/2013 at price of $3.00 with a 42.86% gain in 3 days.

Updates

11/26/2013 10:15:22 AM

We are taking profits on GOGO trade.

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