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Posts Tagged ‘Credit Spreads’

Can ADBE (ABDE) Hold Above the $500 Price Point?

Monday, October 19th, 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.

ADBE has doubled from its March low and the following two articles lay out reasons why the stock may continue to gain. One of them even makes a case that the stock is undervalued at current levels, despite to impressive rally as of late – Adobe’s Stock To Continue Growing? and Adobe (ADBE) Up 6.4% Since Last Earnings Report: Can It Continue?

Technicals

After correcting lower last month, ADBE is starting to once again show signs of upward momentum. The stock has posted a series of higher highs and higher lows over the last four weeks as it oscillates higher in a rising trend channel. Buyers have defended the lower line of the channel as well as dips towards the 20-Day moving average. Further, a break above the $500 level earlier this month is a sign of strength. Strong near-term support is seen in the $492-$500 area.

ADBE Chart October 2020 above $500

ADBE Chart October 2020

If you agree there’s further upside ahead for ADBE, consider this trade which relies on the stock remaining above the $500 level through the expiration in five weeks.

Buy To Open ADBE 20NOV20 495 Puts (ADBE201120P495)
Sell To Open ADBE 20NOV20 500 Puts (ADBE201120P500) for a credit of $2.08 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when ADBE was trading near $503.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $206.70. This reduces your buying power by $500 and makes your investment $293.30 ($500 – $206.70).  If ADBE closes at any price above $500 on November 20, both options will expire worthless, and your return on the spread would be 70% ($206.70 / $293.30), or 798% annualized.

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

IBD Underlying Updates October 17, 2020

IBD Underlying Updates October 17, 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

Lowe’s (LOW) Boosted by Rise in Home Improvement Spending

Monday, October 12th, 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.

LOW has posted stellar gains in the year thus far. The following two articles discuss what drove the surge since late March as well as reasons why the momentum could continue – Lowe’s Stock Can Keep Rallying Because People Will Be Spending More Time at Home for Longer and 3 Reasons Why Lowe’s (LOW) Is a Great Growth Stock.

Technicals

From a technical standpoint, LOW has broken higher from an ascending triangle which is a bullish continuation pattern. Support for near-term dips falls at $170.50 which marks the top of the triangle. LOW is up 45% year to date and is one of only a few stocks on the IBD Top 50 list that has broken to a record high in October.

LOW Chart October 2020 bullish continuation pattern

LOW Chart October 2020

If you agree there’s further upside ahead for LOW, consider this trade which relies on the stock remaining above the $172.50 level through the expiration in five weeks.

Buy To Open LOW 13NOV20 170 Puts (LOW201113P170)
Sell To Open LOW 13NOV20 172.5 Puts (LOW201113P172.5) for a credit of $1.13 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when LOW was trading near $173.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $111.70. This reduces your buying power by $250 and makes your investment $138.30 ($250 – $111.70).  If LOW closes at any price above $172.50 on November 13, both options will expire worthless, and your return on the spread would be 81% ($111.70 / $138.30), or 924% annualized.

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

IBD Underlying Updates October 10, 2020

IBD Underlying Updates October 10, 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

Microsoft (MSFT) – Recent Tech Sell-Off Offers a Buying Opportunity

Monday, September 7th, 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 offer compelling reasons why MSFT could move higher. The first is an analyst upgrade with a price target of $240 – Microsoft Stock (MSFT) Gets Price Target Increase To $240 From Mizuho. The second article outlines MSFT’s competitive advantages –  2 Tech Stocks That Are Thriving Despite the Coronavirus.

Technicals

We offered a trade idea in MSFT at the start of August and the option spread used in the idea expired for a 74% profit on Friday. Because of the decline over the past few days, the stock is once again testing the same trendline that made the trade attractive last time around. The 50-day moving average is also in play and this is an indicator the stock has not closed below in over four months. Friday’s candlestick formation signals buying activity and that the support confluence is being defended, at least so far.

MSFT Chart September 2020

MSFT Chart September 2020

If you agree there’s further upside ahead for MSFT, consider this trade which relies on the stock remaining above $212.50 through expiration on October 9.

Buy To Open MSFT 09OCT20 210 Puts (MSFT201009P210)
Sell To Open MSFT 09OCT20 212.5 Puts (MSFT201009P212.5) for a credit of $1.20 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when MSFT was trading near $214.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $118.70. This reduces your buying power by $250 and makes your investment $131.30 ($250 – $118.70).  If MSFT closes at any price above $212.50 on October 9, both options will expire worthless, and your return on the spread would be 90% ($118.70 / $131.30), or 1027% annualized.

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

IBD Underlying Updates September 5, 2020

IBD Underlying Updates September 5, 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

Regeneron Pharmaceuticals (REGN) Rallies to Two and a Half Year High

Monday, March 9th, 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.

While many companies have seen a sharp drop in their stock price as a result of the Coronavirus, REGN has broken to levels not seen since September 2017. Take a look at the following two articles for details – Regeneron (REGN) Gains from Focus on Coronavirus Treatments and Why Regeneron Shares Rose 31.6% in February.

Technicals

The weekly chart below shows REGN breaking higher from a downward trend channel that has contained price action for nearly five years. This type of upward break usually signals a bullish continuation. On a daily chart, the stock also shows strong upward momentum and technical signs of breaking out. The main appeal to this stock is that it is notably outperforming in a period where the markets have generally been under pressure. Further, the stock is benefiting from the same driver that is otherwise creating downward pressure in the broader equity markets.

REGN Chart March 2020: Coronavirus testing

REGN Chart March 2020

If you agree there’s further upside ahead for REGN, 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 REGN 09APR20 490 Puts (REGN200409P490)
Sell To Open REGN 09APR20 492.5 Puts (REGN200409P492.5) for a credit of $1.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when REGN was trading near $494.  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 REGN closes at any price above $492.5 on April 09, 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 March 7, 2020

IBD Underlying Updates March 7, 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

Square (SQ) Posts Small Weekly Gain Amidst a Volatile Week in the Markets

Monday, March 2nd, 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.

While equity markets fell sharply in the past week, Square’s stock price enjoyed a boost from its positive earnings report. Check out what these analysts have to say about the stock – Square earnings net stock an upgrade as analyst sees huge market for Cash App and Better Buy: PayPal Holdings vs. Square.

Techincals

SQ has shown strength as a major horizontal level has come into play near $83 and the stock managed to close above it while the rest of the equity markets mostly posted notable losses in the past week. The upward momentum remains intact, mostly due to a strong earnings report. While above the $83 price point, this stock looks poised to make another run for all-time highs near the psychological $100 mark. SQ has traded in a range since 2019 and the bullish breach above $83 appears to be signaling a bullish breakout.

SQ Chart March 2020

SQ Chart March 2020

If you agree there’s further upside ahead for SQ, consider this trade which is a bet that the stock will continue to advance over the next five weeks, at least a little bit.

Buy To Open SQ 03APR20 81 Puts (SQ200403P81)
Sell To Open SQ 03APR20 83.5 Puts (SQ200403P83.5) for a credit of $1.15 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when SQ was trading near $83.  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 $113.70 and your broker would charge a $250 maintenance fee, making your investment $136.30 ($250 – $113.70).  If SQ closes at any price above $83.5 on April 03, both options would expire worthless, and your return on the spread would be 83% (947% annualized).

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

IBD Underlying Updates February 29, 2020

IBD Underlying Updates February 29, 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

Visa (V) – A Steady Performer Poised for Gains

Monday, December 23rd, 2019

 

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.

Visa (V) – A Steady Performer Poised for Gains

Visa is a popular stock among analysts. So much so that Kiplinger included it in their top 20 stocks to buy for 2020. Morgan Stanley likes the stock as well, check out the following article that discusses a price target upgrade – Morgan Stanley lifts Visa, Mastercard price targets.

Technicals

Visa rallied to a record high in the past week, clearing above a hurdle near $186 that had held it lower in September. The stock trades comfortably above its 20-day moving average which has been offering support ever since the stock climbed above it in the second half of October.

VISA Chart December 2019 options trading idea

V Chart December 2019

If you agree there’s further upside ahead for V, 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 V 24JAN20 185 Puts (V200124P185)
Sell To Open V 24JAN20 187.5 Puts (V200124P187.5) for a credit of $0.87 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when V was trading near $188.  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 $250 maintenance fee, making your investment $164.30 ($250 – $85.70).  If V closes at any price above $187.5 on January 24, both options would expire worthless, and your return on the spread would be 52% (593% annualized).

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

IBD Underlying Updates December 21, 2019

IBD Underlying Updates December 21, 2019

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

Green Lights are Flashing for Merck & Co (MRK)

Monday, December 16th, 2019

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.

Merck has been in the spotlight because of a recent acquisition and as several biotech’s have produced outsized gains as of late. The following two articles discuss the acquisition and how MRK is a better option compared to one of its peers – Merck: Adding To The Pipeline and Better Buy: Eli Lilly vs. Merck.

Technicals

The recent technical development in MRK is a significant one. The stock has broken above a horizontal resistance level at $87 that had held it lower on three notable attempts since the summer. Such a consolidation, followed by a break,, is often a precursor to a much larger move to come. With the stock still trading relatively close to its breakout point there is good value as technical traders usually look to defend breakout points if they were to be retested.

MRK Chart December 2019 broken resistence level

MRK Chart December 2019

If you agree there’s further upside ahead for MRK, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least a little bit.

Buy To Open MRK 17JAN20 87.5 Puts (MRK200117P87.5)
Sell To Open MRK 17JAN20 90 Puts (MRK200117P90) for a credit of $0.92 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MRK was trading near $89.  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 $90.70 and your broker would charge a $250 maintenance fee, making your investment $159.30 ($250 – $90.70).  If MRK closes at any price above $90 on January 17, both options would expire worthless, and your return on the spread would be 57% (650% annualized).

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

IBD Underlying Updates December 14, 2019 via Terry's Tips

IBD Underlying Updates December 14, 2019

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

Jazz Pharmaceuticals (JAZZ) – A Pharma Stock on a Tear

Monday, December 9th, 2019

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.

Recent media coverage suggests Jazz Pharmaceuticals is a stock that investors certainly want to own. Check out what these two articles have to say about it – Hedge Funds Got Back Into Jazz Pharmaceuticals plc and  Two stocks I’d tuck away forever: Jazz Pharmaceuticals plc (JAZZ), HollyFrontier Corporation (HFC).

Technicals

JAZZ is showing a textbook technical breakout. The stock traded between roughly $115 and $145 for most of the year before finally breaking higher in November. The $145 price point offered major resistance in April and July and is now seen as support. In fact, a dip toward the level in the past week was promptly bought up, offering some confirmation that buyers do view the level as support. Further, the upward momentum from the October low is unusually strong which also confirms the outlook of a technical breakout.

JAZZ Pharmaceuticals Chart December 2019

JAZZ Chart December 2019

If you agree there’s further upside ahead for JAZZ, consider this trade which is a bet that the stock will continue to advance over the next six weeks, or at least a little bit.

Buy To Open JAZZ 17JAN20 145 Puts (JAZZ200117P145)
Sell To Open JAZZ 17JAN20 150 Puts (JAZZ200117P150) for a credit of $2.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when JAZZ was trading near $149.  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 $216.70 and your broker would charge a $500 maintenance fee, making your investment $283.30 ($500 – $216.70).  If JAZZ closes at any price above $150 on January 17, both options would expire worthless, and your return on the spread would be 76% (711% annualized).

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

IBD Underlying Updates December 7, 2019

IBD Underlying Updates December 7, 2019

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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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.

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