DailyPlay -Opening Trade (PAYC) – April 29, 2025

PAYC Bullish Opening Trade Signal

Investment Rationale

Paycom Software Inc. (PAYC) presents a compelling bullish setup heading into its Q1 earnings report, scheduled for May 7, 2025. The stock has recently broken out of a multi-month consolidation pattern with increasing volume and strong momentum, signaling renewed investor confidence. PAYC’s leadership in human capital management solutions, coupled with healthy operating margins and an improving macro backdrop for enterprise software spending, provides a favorable backdrop for continued upside. The upcoming earnings event could serve as a catalyst, especially if management delivers upside surprises or raises guidance amid stabilization in enterprise demand.

PAYC has recently cleared resistance near the $220 level, confirming a breakout from its multi-month trading range. This move is supported by rising volume and strong relative strength versus the S&P 500, indicating institutional accumulation. The breakout targets a measured move toward $270, with interim resistance at $242. The stock remains well-supported above its 20-day and 50-day moving averages, and momentum indicators continue to trend positively. Overall, the technical structure favors a continuation higher, particularly if earnings provide a tailwind.

While PAYC trades near parity with industry valuation multiples, its margin superiority offers a key edge as software investors increasingly focus on profitability and efficiency. The company’s ability to convert top-line growth into robust earnings, along with stable recurring revenues from its cloud-based platform, supports the case for multiple expansion.

• Forward PE Ratio: 26.21x vs. Industry Median 26.17x
• Expected EPS Growth: 10.37% vs. Industry Median 12.54%
• Expected Revenue Growth: 9.48% vs. Industry Median 9.67%
• Net Margins: 26.66% vs. Industry Median 10.19%

A bullish put vertical spread using the May 16, 2025 expiry is well-positioned to capture near-term strength while limiting downside risk. The trade involves selling the 220 strike put and buying the 210 strike put for a net credit. This strategy benefits from PAYC holding above $220 through expiration, a level that now acts as support following the recent breakout. With only 17 days to expiry, the setup offers a favorable risk/reward ratio of approximately 0.64 and aligns well with the anticipated post-earnings upside momentum.

PAYC – Daily

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 3 Contracts PAYC May 16 $220/$210 Put Vertical Spreads @ $3.90 Credit per Contract.

Total Risk: This trade has a max risk of $1,830 (3 Contracts x $610) based on a hypothetical $100k portfolio risking 2%. We suggest risking only 2% of the value of your portfolio and divide it by $610 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is expected to continue higher off recent support.

1M/6M Trends: Bullish/Bullish

Relative Strength: 10/10

OptionsPlay Score: 98

Stop Loss: @ $7.80 (100% loss to value of premium)

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Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

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