Investment Review №340. The Bombshell Effect

Idea summary

A tactical position for a continued upside move in AST SpaceMobile over an approximately 8-week horizon through the purchase of a $90 strike call option. The idea is based on a combination of supportive partnership-related news flow and persistently high short positioning, which could further amplify the upside if the current trend holds. The lower strike makes the position less demanding in terms of further upside in the underlying, although it does not eliminate the risk of a sharp premium drawdown on a pullback.

Key arguments 

• A high short interest remains an important driver. ASTS still has elevated short positioning, which means that if the rally continues, short covering could provide additional upside support.
• Short positioning has not been meaningfully reduced. Recent data shows that short interest has continued to rise, suggesting that bearish positioning remains in place and the squeeze potential is still intact.
• The news flow supports a re-rating scenario. Partnerships with telecom operators and the development of the satellite-to-smartphone model strengthen confidence in the company’s commercial potential.

Risk management

If, on the expiration date of May 15, 2026, the price of the underlying asset is above $90 but below $104.58, the investor will incur a loss, which will vary depending on the final stock price. If the price of the underlying asset is below $90, the investor will realize the maximum loss equal to the premium paid, or $1,458. If the price of the underlying asset is above the break-even level of $104.58, the position will begin to generate a profit. The base-case scenario for the trade is to hold the position until the premium reaches the target level of $2,800.

Trade parameters

P/L of the option strategy