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Posts Tagged ‘Bearish Options Strategies’

The Dip in Microsoft (MSFT) Offers a Buying Opportunity

Monday, August 3rd, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Microsoft has dipped lower over the past few weeks, but several analysts think the broader outlook calls for more upside. Check out the following two articles which discuss the recent earnings report and how the pros outweigh the cons for MSFT investors – Microsoft revenue grew 13% despite coronavirus and Should You Buy Microsoft (MSFT) Stock?

Technicals

From a technical perspective, there are a few things that make MSFT attractive at current prices. First, there is a trendline in place that extends back to lows posted in April and the stock is seen bouncing from it. Further, this same trendline is intersecting with the $200 level which is seen as a support level. In addition to support confluence, there is a candlestick pattern on a weekly chart that suggests a bullish reversal may be taking place.

MSFT Chart August 2020 buy dip in all time high

MSFT Chart August 2020

If you agree there’s further upside ahead for MSFT, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open MSFT 4SEPT20 202.5 Puts (MSFT20084P202.5)
Sell To Open MSFT 4SEPT20 205 Puts (MSFT20084P205) for a credit of $1.08 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MSFT was trading near $205.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $106.70 and your broker would charge a $250 maintenance fee, making your investment $143.30 ($250 – $106.70).  If MSFT closes at any price above $205 on September 4, both options would expire worthless, and your return on the spread would be 74% (844% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates August 1, 2020

IBD Underlying Updates August 1, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Can Chegg (CHGG) Continue the Upward Rally?

Monday, July 27th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

The following two articles outline several reasons why Chegg (CHGG) could see some more upside: Does Chegg (NYSE:CHGG) Have The Makings Of A Multi-Bagger? and Chegg (CHGG) Upgraded to Strong Buy: Here’s What You Should Know

Technicals

From a technical perspective, CHGG is seen dipping lower to test support from a rising trend channel that has encompassed price action since the middle of last month. Further support is seen just below the trend channel at the $70 price point. What’s most appealing is that the stock has been outperforming the broader markets in recent times and has held ground while other stocks have eased back. A minor hurdle is seen near $75. If the stock is able to clear it, the odds for a new record high appear favorable.

CHGG Chart July 2020

CHGG Chart July 2020

If you agree there’s further upside ahead for CHGG, consider this trade which is a bet that the stock will continue to advance over the next four weeks, or at least not decline very much.

Buy To Open CHGG 21AUG20 65 Puts (CHGG200821P65)
Sell To Open CHGG 21AUG20 70 Puts (CHGG200821P70) for a credit of $1.68 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when CHGG was trading near $73.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $166.70 and your broker would charge a $500 maintenance fee, making your investment $333.30 ($500 – $166.70).  If CHGG closes at any price above $70 on August 21, both options would expire worthless, and your return on the spread would be 50% (730% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates July 25, 2020

IBD Underlying Updates July 25, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Should You Buy the Dip in Adobe (ADBE)?

Monday, July 20th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Adobe has been a long-term outperformer and the recent dips could offer an attractive entry point for buyers. Check out what the following two analysts have to say about the stock – Here’s Why Adobe (ADBE) Stock Could be a Solid ‘Buy’ in Today’s Market and Is Adobe Stock A Buy Right Now? Here’s What Earnings, ADBE Chart Show.

Technicals

Adobe has corrected lower in the past week and is seen testing a confluence of support. The support area consists of a horizontal level at $423 that previously acted as support in late June as well as the lower bound of a trend channel that has encompassed price action since April. The earlier downside momentum has already subsided which signals that buyers are defending this area. While above $423, the stock has the potential to continue higher, in line with the trend from the low in March.

ADBE Chart July 2020 buy the dip

ADBE Chart July 2020

If you agree there’s further upside ahead for ADBE, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open ADBE 21AUG20 425 Puts (ADBE200821P425)
Sell To Open ADBE 21AUG20 430 Puts (ADBE200821P430) for a credit of $2.15 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ADBE was trading near $432.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $213.70 and your broker would charge a $500 maintenance fee, making your investment $286.30 ($500 – $213.70).  If ADBE closes at any price above $430 on August 21, both options would expire worthless, and your return on the spread would be 75% (855% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates July 18, 2020

IBD Underlying Updates July 18, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Kroger (KR) Shows Renewed Upward Momentum Following an Earnings-Inspired Dip

Monday, July 6th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Several analysts have positive things to say about Kroger, here are two of them – Kroger: How The COVID-19 Crisis Could Provide Long-Term Tailwinds and Are Investors Undervaluing Kroger (KR) Right Now?

Technicals

Kroger corrected lower in June but the decline was shallow which signals underlying strength. Further, the dip that followed their recent earnings report was promptly bought up and the upward momentum has picked up notably since then. Strong support for the stock is seen at $32.70 as the 20 and 50-day moving averages have converged towards each other at that price point. Kroger has not traded below it’s 50-day moving average on a sustained basis for nearly a year as buyers continue to accumulate this stock near that particular indicator. To the upside, the $34.50 price point might be a near-term hurdle as it was in May, but a break above it would clear the path for a retest of the March high near $37.

KR Chart July 2020

KR Chart July 2020

If you agree there’s further upside ahead for KR, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open KR 7AUG20 30.5 Puts (KR20087P30.5)
Sell To Open KR 7AUG20 33.5 Puts (KR20087P33.5) for a credit of $0.87 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when KR was trading at$33.50.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $85.70 and your broker would charge a $300 maintenance fee, making your investment $214.30 ($300 – $85.70).  If KR closes at any price above $33.50 on August 7, both options would expire worthless, and your return on the spread would be 40% (456% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates July 4, 2020

IBD Underlying Updates July 4, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Dollar General (DG) Stands to Benefit from Post Lockdown Sales Boost

Monday, June 29th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Check out the following two articles which have positive things to say about Dollar General – Top Consumer Staples Stocks for July 2020 and  Record Retail Sales Lead Post-Lockdown Recovery: 5 Winners. The first article highlights DG as one of the fastest growing consumer staples stocks based on its earnings per share ratio. The second article discusses why DG is one of five stocks that stands to gain because of lockdown easing measures.

Technicals

There are a number of things that signal strength in DG. The stock was quick to recover from the Coronavirus inspired push lower in March, and it didn’t take long for it to break to a fresh record high. Compare this to the S&P 500 which has yet to fully recover its losses from March. Further, DG has been able to continue the upward momentum since breaking to a record high in April, and dips have been shallow since. There is an upward trend channel that has encompassed price action for nearly three months now and it points to strong support at $186.

DG Chart June 2020 top 5 covid sales

DG Chart June 2020

If you agree there’s further upside ahead for DG, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open DG 31JUL20 182.5 Puts (DG200731P182.5)
Sell To Open DG 31JUL20 187.5 Puts (DG200731P187.5) for a credit of $1.78 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when DG was trading near $189.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $176.70 and your broker would charge a $500 maintenance fee, making your investment $323.30 ($500 – $176.70).  If DG closes at any price above $187.5 on July 31, both options would expire worthless, and your return on the spread would be 55% (627% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates June 27, 2020

IBD Underlying Updates June 27, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Netflix is Ready to Break to a Fresh Record High

Monday, June 22nd, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Netflix closed the past week out strong and looks ready to continue the upward momentum. Take a look at what the following analysts had to say about the stock – Netflix ‘Impervious’ To Coronavirus, Recession: Imperial Capital and Netflix Stock: An Easy 2x

Technicals

NFLX falls in a group of stocks that were quick to recover from the sell-off earlier in the year.The stock has been consolidating within a range since mid-April but the upward momentum seen over the last week or so, combined with a strong weekly close, tilts the odds towards an upward break, in line with the broader trend. To the downside, $416 is considered to be a major support level and has held the stock higher on a weekly close basis. This same level previously served as resistance, holding NFLX lower in 2018. A break above $455 would signal a bullish continuation that stands to attract more buyers and a potential acceleration in momentum.

NFLX Chart June 2020

NFLX Chart June 2020

If you agree there’s further upside ahead for NFLX, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open NFLX 24JUL20 445 Puts (NFLX200724P445)
Sell To Open NFLX 24JUL20 450 Puts (NFLX200724P450) for a credit of $2.24 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when NFLX was trading near $453.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $222.70 and your broker would charge a $500 maintenance fee, making your investment $277.30 ($500 – $222.70).  If NFLX closes at any price above $450 on July 24, both options would expire worthless, and your return on the spread would be 80% (913% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates June 20, 2020

IBD Underlying Updates June 20, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Consider Kirkland Lake (KL) As Gold Prices Start to Regain Upward Momentum

Monday, June 15th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

With the broader markets paring recent gains it appears to be a good time to be in precious metals and gold related stocks. Check out the following two articles which discuss the upside potential and a recent price upgrade – 3 Gold Stocks to Buy in June and Roth sees gold rallying to $2,200 by 2022, upgrades Kirkland Lake.

Technicals

From a technical perspective, KL has come into some notable support near $36 that buyers have defended thus far. There are a few more layers of support between $34.50 and $35 that originate from a weekly chart and technical traders may look to defend these levels in the event the stock dips a bit further. In addition to the strong downside support, a sharp rise in spot gold in the past week stands to keep related stocks well bid. Also, the popular gold miners ETF (GDX) made a notable bullish breakout last month and the technical outlook suggests this sector could be on the verge of a major bull run.

KL Chart June 2020 Gold stock options

KL Chart June 2020

If you agree there’s further upside ahead for KL, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open KL 17JUL20 30 Puts (KL200717P30)
Sell To Open KL 17JUL20 35 Puts (KL200717P35) for a credit of $1.33 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when KL was trading near $37.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $131.70 and your broker would charge a $500 maintenance fee, making your investment $368.30 ($500 – $131.70).  If KL closes at any price above $35 on July 17, both options would expire worthless, and your return on the spread would be 36% (411% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates June 13, 2020

IBD Underlying Updates June 13, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Dividend Investors Will Love Alexandria Real Estate (ARE)

Monday, June 8th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

With many tech stocks entering overbought territory, the appeal for REIT stocks is rising. Take a look at what the following two analysts had to say about Alexandria Real Estate – Why Should You Add Alexandria (ARE) Stock to Your Portfolio? and This is Why Alexandria Real Estate Equities (ARE) is a Great Dividend Stock.

Technicals

The technical outlook for ARE looks promising. The stock has rallied above its 200-day moving average after sellers stepped in to protect a rising trendline that is drawn from the March low. Further, ARE is seen attacking to a resistance level at $158 with strength and is on the verge of a bullish breakout. The moving average and trendline offer strong support for near-term dips.

ARE Chart June 2020 real estate stock options

ARE Chart June 2020

If you agree there’s further upside ahead for ARE, consider this trade which is a bet that the stock will continue to advance over the next six weeks, or at least not decline very much.

Buy To Open ARE 17JUL20 150 Puts (ARE200717P150)
Sell To Open ARE 17JUL20 155 Puts (ARE200717P155) for a credit of $1.43 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ARE was trading near $159.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $141.70 and your broker would charge a $500 maintenance fee, making your investment $358.30 ($500 – $141.70).  If ARE closes at any price above $155 on July 17, both options would expire worthless, and your return on the spread would be 40% (374% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates June 6, 2020

IBD Underlying Updates June 6, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Zoom Video Communications (ZM) Remains a Top Performer in Today’s Markets

Monday, June 1st, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Zoom Video was criticized a few months back for security and other concerns, but nevertheless, the stock continued higher. It looks even more appealing now as the company continues to gain market share and the prior concerns are no longer weighing on the company’s stock price. Several analysts share the same bullish outlook, here are two of them – Here’s Why Zoom Stock Has Been Soaring — and What to Expect Going Forward and Hedge Funds Have Never Been This Bullish On Zoom Video Communications, Inc. (ZM).

Technicals

From a technical perspective, ZM has been held higher by a rising trendline for most of the year. The stock tested this trendline in the past week and in a matter of days it was on the verge of breaking to an all-time high. The stock has been well bought on dips in general and the momentum is firm to the upside. The $180 level could prove to be a short-term hurdle but there is little reason to believe this stock will not break to all-time highs.

ZM Chart June 2020 COVID stocks surge

ZM Chart June 2020

If you agree there’s further upside ahead for ZM, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open ZM 10JUL20 177.5 Puts (ZM200710P177.5)
Sell To Open ZM 10JUL20 180 Puts (ZM200710P180) for a credit of $1.33 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ZM was trading near $180.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $131.70 and your broker would charge a $250 maintenance fee, making your investment $118.30 ($250 – $131.70).  If ZM closes at any price above $180 on July 10, both options would expire worthless, and your return on the spread would be 111% (1266% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates May 30, 2020

IBD Underlying Updates May 30, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

The Trade Desk (TTD) Has the Potential to Break to an All-Time High

Monday, May 25th, 2020

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Several stocks have already broken to all-time highs and TTD looks poised to join this group. Check out the following two articles that both suggest that while TTD might be a bit expensive, it is a top pick among investors – The Trade Desk: Capturing A Revolutionary Trend and Investing in These 3 Top Stocks Could Double Your Money.

Technicals

TTD has shown strong upward momentum since the start of April. Dips have been shallow as buyers are quick to step in. Resistance near $324 has triggered a bit of pullback over the past few weeks which is to be expected considering it marks the previous all-time high. But the general lack of selling pressure from $324 is a sign of strength. Combined with the strong upward momentum as of late, a strong case can be made that the stock is headed to all-time highs. Technical support for the stock is seen at $280 which is considered significant as it acted as a major barrier over the summer last year.

TTD Chart May 2020 - Stock All Time High

TTD Chart May 2020

If you agree there’s further upside ahead for TTD, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open TTD 26JUN20 305 Puts (TTD200626P305)
Sell To Open TTD 26JUN20 307.5 Puts (TTD200626P307.5) for a credit of $1.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when TTD was trading near $308.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $1.30 per spread.  Each contract would then yield $116.70 and your broker would charge a $250 maintenance fee, making your investment $133.30 ($250 – $116.70).  If TTD closes at any price above $307.5 on June 26, both options would expire worthless, and your return on the spread would be 88% (1004% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates May 23, 2020

IBD Underlying Updates May 23, 2020

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

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Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins