I’ll be honest: Until I discovered that Alight (ALIT) was a former SPAC (special purpose acquisition company) owned by billionaire investor Bill Foley, owner of the Las Vegas Knights NHL hockey team, I had no interest in discussing the provider of human capital technology and services’ stock or options. 

However, with two calls in the top five unusually active options in Wednesday trading, I couldn’t ignore them, even if I knew little about its business. 

Yesterday’s unusual options activity wasn’t exactly a hive of activity, with the top Vol/OI ratio less than 100. When that happens, you know options volumes should be lower than usual. 

On Wednesday, the options volume was 49.31 million, about 1.5 million less than the average daily volume. Calls outsold puts by 1.22 times. 

There are several ways to play Alight’s two call options from yesterday. Here’s my two cents on the subject. 

A Little About Alight

As I said, it provides human capital technology and services. The company went public on July 2, 2021, when it combined with Foley Trasimene Acquisition Corp., a SPAC Bill Foley took public in May 2020, raising $900 million to find and combine with an operating business. 

Like many SPACs, it sold its shares in 2020, at $10 each. Approximately 4.75 years later, its shares are trading 40% below their IPO price. That’s never good, but not unusual for SPACs.  

Often with SPACs that completed transactions in 2021 and 2022, the valuations of the combinations were excessive. That could be the reason for the falling share price. 

As for analysts, eight cover ALIT stock, with seven rating it a Buy, and a median target price of $11, nearly double its current share price. While eight analysts is not a large number, it’s enough to suggest that Wall Street isn’t missing something, good or bad. 

In addition, the analyst EPS estimate for 2025 is $0.60 and $0.65 for 2026. It trades at 9.4x the 2026 estimate. Dayforce (DAY), a big competitor with a Canadian pedigree, trades at 19.3 times its 2026 EPS estimate, according to S&P Global Market Intelligence. 

Therefore, based on earnings, its stock is much cheaper than one of its biggest competitors. 

Alight stock has tumbled in recent months because one of its largest shareholders, Cannae Holdings (CNNE), which Bill Foley owns 6% of, announced on Dec. 3 that it sold 12 million shares to generate cash for strategic purposes. Since then, ALIT is down 23%.  

Another possible reason is that its fourth quarter results weren’t anything to write home about, with revenue down 0.3% to $600 million. However, recurring revenue increased to 90.7% of the $600 million.  

On the plus side, its adjusted EBITDA was $217 million in Q4 2024, 5.3% higher than Q4 2023. Further, its adjusted EPS almost doubled in the quarter to $0.24, up from $0.13 a year earlier. 

Equally important, its free cash flow in 2024 was $131 million, or 5.6% of revenue. In 2025, it expects free cash flow to double to $267.5 million, or 11.4% of revenue.  

I might be a rookie regarding Alight, but its business seems healthy enough for me to consider an investment. 

What’s the Play?

I’ve removed the other three stocks to make focusing on the two unusually active calls easier. 

Some investors don’t like long-duration expiration dates. If you’re bullish, however, they make a lot of sense. Both DTEs are 310 days, just shy of one year, which is considered the minimum for LEAPS (Long-Term Equity Anticipation Securities). 

Buying one or more of the $7 or $10 strikes is the most straightforward play. 

As you look at the trio above, which includes a $5 strike, your initial reaction might be to go for the $5 strike because it has the highest ITM (in the money) probability at 67.86%, nearly double the $7 strike, and 6.5x the $10 strike. If you’re bullish on the stock, it’s a logical conclusion.

However, you should always consider leverage and how to utilize it best when playing options. 

In the case of the $5 strike, you’re paying almost 29% of yesterday’s closing price up front. The $7 falls to 12.4%, and the $10 strike is just 3.3%, providing maximum leverage in return for minimum probability. 

So, if you’re 100% convinced ALIT stock will be trading at $20 in 310 days, the $5 strike is a no-brainer. If less sure, like a rookie like myself is, I’d err on the side of caution, and opt for the $10 strike and a minimal $20 outlay. 

What the Other Play?

The other possibility is to do a bull call spread. In this strategy, you buy a call and sell a call at a higher strike price with the same expiration date. If you are bullish on the stock, this is done. 

You want the share price above the higher strike price at expiration to achieve maximum profit. 

Using the $7 and $10 strike and current prices as I write this early in Thursday trading, the net debit, or maximum loss, would be $0.65 [$7 ask price $0.75 - $10 bid price $0.10] and the maximum profit would be $2.35 [$10 strike - $7 strike - $0.65 net debit], a maximum profit percentage of 361.54%, and a risk/reward of 0.27.7 to 1.  

It’s easy to see why the $7 and $10 strike were so popular in Wednesday’s options trading.