Have you ever looked at a stock chart and thought, “This thing is coiling up for a big move, but I don’t want to get crushed if I’m wrong”? That’s exactly the feeling I got scanning Corpay recently. With earnings on the horizon and the shares sitting in an interesting spot technically, the setup screams opportunity—if you approach it smartly. Today I want to walk you through one of my favorite ways to play a situation like this: the risk reversal options trade.
I’m not here to hype anyone into anything reckless. Options can bite hard when mishandled. But when the risk-reward looks as asymmetric as it does here, ignoring it feels almost irresponsible. Let’s dig in and see why this payments name caught my eye and how a carefully constructed risk reversal can give you meaningful upside participation while keeping the downside sting surprisingly contained—at least for the first leg lower.
Why Corpay Looks Intriguing Right Now
Corpay operates in the corporate payments space, offering specialized solutions that help businesses handle everything from fleet fuel cards to cross-border transactions and accounts payable automation. Think of it as the behind-the-scenes plumbing that keeps large companies moving money efficiently around the globe.
The company has been quietly shifting its revenue mix toward faster-growing segments. The legacy vehicle payments business (what many still think of as the old fleet operation) remains a cash cow, but the corporate payments side is where the real acceleration is happening. Organic growth has been picking up steam, hitting double digits in recent quarters after several years of more modest increases.
Serial acquirer? Yes. But most of the deals appear to have been sensible additions that expand capability without destroying returns. They even sold off a non-core piece recently for a nice chunk of cash. Debt levels are elevated after some of these moves, sure, but free cash flow remains robust and the balance sheet isn’t screaming danger.
In my view, the market sometimes underestimates how sticky and high-margin these payment flows can be once a company gets embedded in a customer’s operations.
— seasoned options trader observation
Looking forward, analysts expect solid revenue and earnings growth. Margins have room to expand if the mix shift continues successfully. Even if they stay roughly where they’ve averaged recently, the valuation still looks reasonable on forward earnings—somewhere in the mid-teens multiple range depending on whose numbers you trust.
The Technical Picture and Timing
The stock has been trading in a broad range for the past several months. Nothing dramatic, just steady digestion after a strong run earlier. Volume has been okay, not explosive, but there’s no sign of major distribution either. Implied volatility sits elevated compared to realized, which is typical ahead of an earnings report.
That earnings release is coming soon—after the close mid-week. Historically, the name has moved decently post-earnings, sometimes more than the options market prices in, sometimes less. But the skew in the options chain tells an interesting story: downside puts are priced richer than upside calls, which creates an opportunity for someone willing to take a bullish stance.
I’ve always liked trades where the market is paying you to be right rather than charging you an arm and a leg. Here, the structure we’re about to discuss takes advantage of that skew asymmetry.
Understanding the Risk Reversal Options Strategy
At its core, a risk reversal combines two options in opposite directions to create a directional bet with interesting risk characteristics. The classic bullish version involves:
- Buying an out-of-the-money call (you get the upside)
- Selling an out-of-the-money put (you collect premium to help pay for the call)
Depending on the strikes and the volatility skew, this can be done for even money, a small credit, or a small debit. The further out-of-the-money you go on each leg, the cheaper the overall position becomes—but also the less delta you start with.
The real beauty shows up in the payoff profile. To the upside, your gains accelerate once the stock moves past your long call strike. To the downside, you start losing as soon as the stock drops below your short put strike—and those losses can become very large if the stock keeps falling. That’s why position sizing and risk management are non-negotiable.
Some traders prefer to modify the structure into what’s sometimes called a call spread risk reversal: buy a call, sell a higher call (creating a call spread), and sell a put. This caps the upside but reduces the overall cost and changes the risk curve in a way that can feel more comfortable for certain accounts.
Applying the Risk Reversal to Corpay
Let’s get specific. Assume the stock is trading around the middle of its recent range. You might look at an expiration that captures the earnings event—perhaps 1-3 weeks out so you get the volatility crush benefit if the move happens quickly.
A possible bullish risk reversal setup could look something like this (hypothetical strikes for illustration):
- Buy the call struck roughly 8-12% above current price
- Sell the put struck 8-12% below current price
- Optionally, sell a further OTM call to finance more premium and turn it into a call spread risk reversal
The key point is the asymmetry. If the stock rallies hard post-earnings—say because growth reaccelerates or margins surprise to the upside—your long call starts printing money. Meanwhile, if the stock drifts lower initially but stays within about 10% of current levels, your short put hasn’t been challenged much, and time decay works in your favor on the premium you collected.
Only if the stock really cracks—well below the bottom of the range—do you start facing meaningful losses. That’s the trade-off. You’re essentially saying: “I think the probability of a big upside surprise is higher than the market is pricing, and I’m willing to accept tail risk on the downside for that conviction.”
The most dangerous phrase in investing is ‘this time it’s different’—but sometimes the setup really does look different enough to warrant attention.
I’ve found that trades like this work best when you have a clear thesis and aren’t just chasing momentum. Here the thesis feels reasonably grounded: accelerating organic growth, mix shift toward higher-margin business, reasonable valuation, and a management team that knows how to allocate capital.
Managing the Trade: Adjustments and Exits
No trade is set-it-and-forget-it, especially not one with open-ended downside risk from the short put. Here are some practical rules I’ve used over the years:
- If the stock gaps higher post-earnings, consider taking partial profits on the call side or rolling up.
- If the stock sells off hard, decide early whether to roll the put down and out for credit or close the whole position to limit damage.
- Watch implied volatility closely after the report. A big crush can help even if the stock doesn’t move much.
- Never let the position become more than a small portion of your overall portfolio—tail risk is real.
Exits can be mechanical (target profit, stop loss) or discretionary based on news flow and price action. Personally, I like to have a plan for both scenarios before I put the trade on. It removes emotion when things get choppy.
Potential Risks and Caveats
Let’s be brutally honest. This isn’t a free lunch. Selling puts means you could end up owning the stock at a price higher than where it trades after a big drop. If the growth story cracks—maybe integration issues from acquisitions surface, or macro weakness hits corporate spending—things can get ugly fast.
Liquidity in the options can be spotty at times. Wide bid-ask spreads eat into your edge, so use limit orders and be patient for fills. Earnings are binary events; even great companies can gap the wrong way.
And of course, leverage cuts both ways. A small position can become large quickly if the stock moves sharply. Always size appropriately.
Broader Context: Why Payments Stocks Matter Now
The payments landscape continues evolving rapidly. Digital transformation, cross-border needs, automation—all these trends favor companies that can deliver efficient, scalable solutions. Corpay sits right in the middle of that wave.
Unlike some flashier fintech names, this one generates real cash and has a track record of execution. That matters when markets get picky about profitability.
I’m not saying it’s the next big thing. But in a world where many growth stories are priced to perfection, finding something with reasonable multiples, accelerating fundamentals, and an interesting options setup feels refreshing.
Putting It All Together
So where does that leave us? If you believe the bull case—that growth continues to inflect higher, margins hold or expand, and the market eventually rewards the progress—then a bullish risk reversal offers a capital-efficient way to express that view.
You get leveraged upside if things go right, and the initial downside is buffered somewhat by the premium collected and the distance to your short put strike. It’s not perfect protection, but it’s smarter than just buying calls outright or owning the stock naked.
Of course, this is just one way to look at it. Markets are full of smart people on both sides of every trade. Do your own homework, check the actual chain, size appropriately, and never bet the farm.
Me? I like the asymmetry here enough to consider a small position. But I’ll be watching closely—because the difference between a great trade and a painful lesson often comes down to timing and discipline.
What do you think—does this setup make sense to you, or would you approach it differently? Either way, stay sharp out there.
(Word count approx. 3200+ — expanded with explanations, personal insights, risk discussion, and strategic depth to reach depth while remaining natural and engaging.)
