From all angles, the investment narrative for aerospace and space exploration company Rocket Lab USA (RKLB) simply pops. Specializing in the design and manufacturing of small to medium-sized rockets, spacecraft and launch services, the enterprise’s main clients are satellite operators and government entities. Given the wider push and intense competition of the space race, RKLB stock couldn’t be better positioned.

It's not just a theoretical talking point either. Rocket Lab has conducted multiple launches of its flagship Electron rocket, with a vast majority of its missions achieving operational success. As such, RKLB stock has rewarded longsuffering investors for their belief. Over the past 52 weeks, the security gained almost 400%. That’s a stunning recovery from the depths of perdition — but it also raises questions.

As we’ve seen in the quantum computing space, when the bulls get nervous, the fallout can materialize in a nanosecond. With RKLB stock enjoying a robust valuation spike, a sudden drop could easily spoil the appetite. Therefore, investors must chart their entry point carefully.

At the moment, the question mark surrounds RKLB’s consolidation phase. Between August to November of last year, the equity witnessed a strong, steady rise. Near the middle of November to the end of the month, shares skyrocketed. But since early December, neither the bulls nor the bears have established control of the narrative.

As such, it’s time to turn to the statistical evidence to better strategize an approach to Rocket Lab.

Empirical Data Provides a Nuanced Case for RKLB Stock

One factor that may help move the needle for bullish speculators is the upward bias in RKLB stock. From the start of any given week, there’s a 53.55% chance that by the end of the fourth subsequent week, RKLB stock will generate a positive non-zero return. During these positive outcomes, the median return lands at 12.5%.

This statistic is calculated stochastically, meaning that it’s an aggregation of all sessions within the dataset, irrespective of context. However, we can get a better understanding of the sentiment shifts in RKLB stock by calculating the stats dynamically; that is, analyzing how shares respond to specific market conditions.

Since Rocket Lab’s public market debut in November 2020, RKLB’s average weekly return clocks in at around 0.28%. Last week, the equity lost 7.17% (defined as the percentage difference between Monday’s open and Friday’s close), which is aberrant. Of the weeks in which RKLB loses between 5% to 10%, there’s a 55.56% chance that four weeks out, it will land in positive territory. And during such outcomes, the median return stands at 16.11%.

Granted, the bump up in bullish odds from 53.55% to 55.56% is miniscule. Nevertheless, evidence exists that investors more often than not buy the dips in RKLB stock. However, if you wanted to speculate on Rocket Lab, it may be better to transact trades which cover the four-week period, which corresponds with the options chain expiring Feb. 7.

Interestingly, in the first two weeks following a weekly loss between 5% and 10%, the volatile event offers no predictive value as to where RKLB stock may head. In the third week following the aforementioned volatile event, there’s actually only a 44.4% chance that RKLB will post a positive return.

In other words, patience is key. If you’re going to buy the dip in RKLB stock, the trade should feature exposure to the week 4 timeline.

Plotting a Bull Call Spread

With RKLB stock having roughly 56% odds of rising by the end of the fourth subsequent week following the aforementioned volatile event, a long iron condor might seem a more prudent strategy. However, should RKLB encounter bearish pressure, the median projection only calls for downside of 9.64% or a per-share price of $24.32.

Frankly, that’s not enough kinesis to make a long condor worthwhile. Therefore, the best idea from a speculative standpoint may well be the bull call spread.

A multi-leg options strategy, the bull call spread involves buying a call and simultaneously selling a call at a higher strike price for the same expiration date. The idea is for the underlying security to reach the short strike price, with the credit received from the short call partially offsetting the debit paid for the long call. Effectively, this trade discounts a net long position.

For the options chain expiring Feb. 7, it’s possible based on dynamic probabilities that RKLB stock could either rise to $31.24 or fall to $24.32. To meet somewhere in the middle, one could choose to split the difference with a short strike price target of $27.50. That would require RKLB to rise 11.6% from Thursday’s close, which is aggressive but doable.

One interesting idea would be to consider the 23.50/27.50 bull call spread. Currently, this transaction would put the breakeven point at $25.21 or only 2.31% above the time-of-writing price. Further, hitting the $27.50 short strike would generate a maximum payout of 133.92%.