Options Corner: CrowdStrike Gains Relevance As Iran Poses Cyber Retaliation Threat

With President Donald Trump's stunning decision to directly involve U.S. forces in Israel's conflict with Iran, the geopolitical environment stands on fragile ground. Cynically, though, this development may provide an upward catalyst for CrowdStrike Holdings Inc CRWD. A cybersecurity specialist, CrowdStrike has been thrust into the spotlight amid an anticipated retaliatory response by Iran. As such, a clear incentive exists among government and private institutions to bolster digital defenses, thus lifting CRWD stock.

On Saturday night, Trump declared successful strikes on three crucial Iranian nuclear sites, labeling the operation a "spectacular military success." During an address to the nation, the president stated that U.S. forces' main objective was to destroy Iran's nuclear enrichment capacity, criticizing its government as the "world's number one state sponsor of terror."

However, the contentious decision to bomb Iran has divided Trump's support among his otherwise fiercely loyal base. On one hand, political supporters praised the decision to attack a longtime adversary and for supporting Israel. On the other end, notable proponents, such as former Fox News host Tucker Carlson, have argued that Trump is turning his back on his America First principles.

Worryingly, the U.S. could be sucked into another protracted military campaign in the Middle East, a matter that is deeply unpopular for the American public. What's more, Iran is likely to retaliate, which may threaten servicemembers stationed in the region. Perhaps most distressingly, Iran could activate sleeper cells to launch terror attacks in the U.S.

Among the asymmetric warfare tools of Iran is its capacity to initiate cyberattacks. Last year, Alphabet Inc. GOOGGOOGL subsidiary Google confirmed that the Islamic nation's Revolutionary Guard launched a series of cyberattacks targeting the political campaigns of Trump, former President Joe Biden and former Vice President Kamala Harris.

With the threat level elevated, both government agencies and private enterprises have every incentive to bolster their digital defenses. By logical deduction, the accelerated demand could lift CRWD stock.

Using Statistical Data To Pinpoint A Strategy For CRWD Stock

As compelling as the fundamental narrative may be for CRWD stock, it still lacks in the area of specificity. For traders (particularly those who focus on options), they live in the world of probabilities. It's not so much about the "why" of an investment but rather the "how" — as in, how much, how fast and how likely.

Since all options expire, an underlying thesis must be accurate in terms of magnitude (y-axis) and in time (x-axis). To address this challenge, it's important to conduct statistical analysis, which sounds easier said than done. At first glance, it's a straightforward process: merely take the desired outcome and divide it by the total frequencies of events in the given dataset.

However, the above approach only calculates odds across the dataset's distribution, which is a derivative probability. What most traders are looking for is the conditional probability: the odds of an outcome materializing over a specific subset of the underlying data. Colloquially, conditional probabilities are akin to situational batting averages, such as when there are runners in scoring position (RISP) as opposed to a simple average over an entire season.

To implement conditional frameworks requires that the measurement metric governing the data speak a unified language. This is the reason why market breadth — or sequences of accumulative and distributive sessions — represents a valuable tool. As a first-order principle (meaning that it cannot be mathematically reduced), market breadth's binary nature facilitates categorization and quantification, which then lends itself to sensible probabilistic analysis.

As it relates to CRWD stock, its price action over the past two months can be converted as a "6-4-U" sequence: six up weeks, four down weeks, with a net positive trajectory across the 10-week period. While this admittedly compresses the dynamic magnitude profile of CRWD into a binary code, the benefit is that this sequence can be catalogued to determine likely forward outcomes.

Based on past empirical data, in 61.9% of cases when the 6-4-U sequence flashes, the following week's price action results in upside, with a median return of 4.04%. Should the bulls maintain control of the market for a second week, past analogs suggest that CRWD stock could be due for a nearly 1% upside move.

Based on Friday's close of $476.30, CRWD may run close to $500 over the next two to three weeks. Given the fundamental catalyst, the security just might eclipse this psychological threshold.

Optimistic But Rational Trades To Consider

Based on the market intelligence above, aggressive traders may consider the 495/500 bull call spread expiring July 11. This transaction involves buying the $495 call and simultaneously selling the $500 call, for a net debit paid of $275. Should CRWD stock rise through the short strike price ($500) at expiration, the maximum reward is $225, a payout of nearly 82%.

Those who want to add an extra week to their timeline may consider the 490/500 bull spread expiring July 18. However, the drawback here is that the spread is considerably more expensive, requiring a net debit of $515. Still, the reward if CRWD stock hits the short strike price at expiration is $485, a payout of over 94%.

In both cases, the common driver is the implied shift in sentiment regime that the 6-4-U sequence generates. As a baseline, the chance that CRWD stock rises on any given week is 55.87%, which is a strong upward bias. But the aforementioned sequence amplifies this bullish edge, further incentivizing a debit-based strategy for those already prone to risk-taking.

The opinions and views expressed in this content are those of the individual author and do not necessarily reflect the views of Benzinga. Benzinga is not responsible for the accuracy or reliability of any information provided herein. This content is for informational purposes only and should not be misconstrued as investment advice or a recommendation to buy or sell any security. Readers are asked not to rely on the opinions or information herein, and encouraged to do their own due diligence before making investing decisions.

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