Credo Tech (CRDO) Leap Covered Call Strategies: Capitalizing on Growth and Volatility

Credo Technology Group Holding Ltd (CRDO) has emerged as a standout semiconductor stock in 2025, driven by explosive revenue growth in AI-driven data infrastructure and a sharp reduction in short interest. With Q2 earnings revealing a 63.6% year-over-year revenue surge and a 353% projected EPS growth trajectory, investors now face a compelling opportunity to deploy LEAP-covered call strategies to capitalize on its momentum while generating structured income. Here's how to structure the trade and why CRDO's fundamentals justify the approach.

CRDO's Q2 Earnings: A Catalyst for Covered Calls

CRDO's Q2 2025 results were a masterclass in execution. Revenue hit $72.0 million—a 20.6% sequential jump—driven by its Lark optical DSPs and PILOT software platform, which are critical to hyperscale data centers and AI deployments. The non-GAAP diluted EPS of $0.07 may seem modest, but analysts now project EPS to hit $1.51 for fiscal 2026, a 353% increase over 2024 levels. This growth is underpinned by:
- AI tailwinds: CRDO's HiWire AECs and optical solutions are integral to the next-gen AI backend networks.
- Margin expansion: Gross margins held steady at 63.6%, while operating expenses grew slower than revenue, fueling profit acceleration.

Why LEAP-Covered Calls for CRDO?

A LEAP-covered call strategy involves buying the stock and selling a call option with a distant expiration (e.g., 12–18 months). This approach suits CRDO for three reasons:
1. Volatility: CRDO's 30-day implied volatility of 45% (vs. 15% for the S&P 500) means option premiums are rich, enhancing income potential.
2. Upside runway: Analysts' $70.86 price target implies 11% upside, but CRDO's AI exposure could trigger a much larger move.
3. Downside protection: Selling calls caps upside participation but reduces cost basis via premium income.

Example Trade (as of June 19, 2025):
- Buy 100 shares of CRDO at $63.80.
- Sell the CRDO Jan 2026 $70 call for a $4.50 premium.
- Break-even: $59.30 (stock price drop tolerated).
- Max profit: $6.20 per share ($70 strike - $63.80 cost + $4.50 premium).

Technical Setup and Risk Management

CRDO's chart shows a bullish ascending triangle pattern, with support at $60 and resistance near $70. The RSI at 55 suggests neither overbought nor oversold conditions, making it ideal for option selling.

Key risks to monitor:
- Short interest: Though down 30% YTD, any abrupt short covering could spike volatility.
- Revenue sustainability: The Q3 2025 revenue guidance of $115M–$125M must be met to sustain momentum.

Institutional Validation and Analyst Sentiment

• Institutional ownership: 78% of shares are held by institutions, including Fidelity and Vanguard, signaling long-term confidence.
• Analyst consensus: 15 “Buy” ratings vs. 1 “Hold,” with no “Sell” calls. MACOM Technology's 111.5% upside potential in the sector further validates semiconductor outperformance.

The Bottom Line: A High-Conviction Setup

CRDO's 353% EPS growth trajectory, coupled with its strategic position in AI infrastructure, makes it a rare blend of growth and volatility—a perfect candidate for LEAP-covered calls. By selling the Jan 2026 $70 call, investors lock in income while maintaining exposure to a stock primed for a breakout.

Final advice:
- Aggressive investors: Pair the covered call with a protective put (e.g., buying the $60 put) to further limit downside.
- Hold until: The $70 strike is reachable by early 2026, aligning with CRDO's revenue guidance and AI deployment timelines.

In a market where growth stocks face valuation scrutiny, CRDO's fundamentals and technicals make it a standout opportunity—one that covered calls can turn into a win-win.