Posts Tagged ‘Earnings Option Strategy’
Monday, October 28th, 2019
Visa’s earnings report in the past week has boosted sentiment among analysts. The following two articles include two upward price target revisions and a case for why the stock can continue to strengthen from here – Visa Analysts Encouraged By Q4 Results, 2020 Guidance and Visa stock gains after forecast paints a picture of continued strength in 2020.
The rally that followed the earnings report has lifted Visa’s stock back above all of the commonly looked at moving averages (20, 50 & 100-day). What’s appealing about V is the long-term trend and that dips have been shallow over the year which points to strong demand. There was a correction lower since early September, but the post-earnings upward momentum suggests the stock may have resumed within its broader uptrend.
Visa Chart October 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 29NOV19 175 Puts (V191129P175)
Sell To Open V 29NOV19 177.5 Puts (V191129P177.5) for a credit of $0.99 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when V was trading near $178. 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 $97.05 and your broker would charge a $250 maintenance fee, making your investment $152.30 ($250 – $97.05). If V closes at any price above $177.5 on November 29, both options would expire worthless, and your return on the spread would be 63% (730% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates October 26, 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
Tags: Auto-Trade, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Announcement, Earnings Option Strategy, Earnings Play, implied volatility, Monthly Options, Options Tutorial Program, Portfolio, Profit, profits, Puts, Risk, SPY, Stocks vs. Stock Options, Terry's Tips, thinkorswim, V, Visa, Volatility, Weekly Options
Posted in 10K Strategies, Credit Spreads, Earnings Announcement Options Strategy, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »
Monday, October 21st, 2019
Synchrony Financial rallied to a two-month high in the past week and several analysts think it can continue higher. Here is what the IBD had to say about the stock – This GE Spinoff Nears Buy Point On Strong Earnings. Also take a look at the following article which discusses Warren Buffett’s stake in the company – Here is What Hedge Funds Think About Synchrony Financial (SYF).
SYF recently regained both its 50 and 100 day moving averages which signals the broader bullish trend has potentially restarted. Of the two, the 100-day moving average was particularly strong resistance throughout September. For this reason, the indicator is now seen as strong support on near-term dips. The break above the 100-day moving average also means a break above the September high which in turn has set a successions of higher highs and higher lows. Another way to look at it is as a range breakout since the stock was essentially consolidating sideways above its 200-week moving average for the past two months or so.
SYF Chart October 2019
If you agree there’s further upside ahead for SYF, 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 SYF 22NOV19 31.5 Puts (SYF191122P31.5)
Sell To Open SYF 22NOV19 34.5 Puts (SYF191122P34.5) for a credit of $0.93 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when SYF was trading near $34.50. 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 $91.70 and your broker would charge a $300 maintenance fee, making your investment $208.30 ($300 – $91.70). If SYF closes at any price above $34.50 on November 22, both options would expire worthless, and your return on the spread would be 44% (502% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates October 19, 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
Tags: Auto-Trade, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Announcement, Earnings Option Strategy, implied volatility, Monthly Options, Options Tutorial Program, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, SYF, Synchrony Financial, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Credit Spreads, Earnings Announcement Options Strategy, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »
Monday, September 30th, 2019
Lululemon Athletica’s reported earnings in early September which led to a rally to fresh all-time highs. Several analysts are expecting more upside, here are two of them – Is Lululemon (LULU) a Solid Growth Stock? 3 Reasons to Think ” Yes “ and UBS Group Analysts Give Lululemon Athletica (NASDAQ:LULU) a $210.00 Price Target.
After hitting all-time highs, LULU has edged lower to pare gains related to the earnings report. A confluence of support is in sight and considered quite strong. The confluence consists of the 50-Day moving average, a horizontal level, and the lower bound of a long-term bullish trend channel. The horizontal level comes in at $188 and previously acted as resistance on several rallies since June. The trend channel dates back to a low printed in late December and has contained price action since.
LULU Chart September 2019
If you agree there’s further upside ahead for LULU, 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 LULU 01NOV19 187.5 Puts (LULU191101P187.5)
Sell To Open LULU 01NOV19 190 Puts (LULU191101P190) for a credit of $1.10 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when LULU was trading near $190. 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 $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $107.50 and your broker would charge a $250 maintenance fee, making your investment $142.50 ($250 – $107.50). If LULU closes at any price above $190 on November 1, 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 September 28, 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
Tags: Auto-Trade, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Announcement, Earnings Option Strategy, Earnings Play, implied volatility, LULU, Lulu Lemon, Monthly Options, Options Tutorial Program, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Credit Spreads, Earnings Announcement Options Strategy, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »
Monday, September 23rd, 2019
The following two articles certainly suggest Adobe is a good buy on the current dip – Adobe: Timely Buying Opportunity and Adobe: Take Advantage of Bearishness to Buy a High-Quality Stock Cheaper.
From a technical perspective, ADBE is testing a major support confluence. The confluence consists of a horizontal line at $275 as well as the 200-day moving average. The horizontal level was major resistance that held the stock lower in 2018 and it is now seen as support. There has been some evidence of the support area holding so far but a break above recent highs around $285 would provide further confirmation.
ADBE Chart September 2019
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 25OCT19 275 Puts (ADBE191025P275)
Sell To Open ADBE 25OCT19 277.5 Puts (ADBE191025P277.5) for a credit of $0.95 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when ADBE was trading near $278. 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 $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $92.50 and your broker would charge a $250 maintenance fee, making your investment $157.50 ($250 – $92.50). If ADBE closes at any price above $277.5 on October 25, both options would expire worthless, and your return on the spread would be 59% (673% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates September 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
Tags: ADBE, Auto-Trade, Bearish Options Strategies, Bull Put Credit Spread, Bullish Options strategies, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Option Strategy, implied volatility, Monthly Options, Options Tutorial Program, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Credit Spreads, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »
Monday, September 16th, 2019
After already doubling this year, one analyst expects that it can do it again. Take a look at the full article here – Boot Barn: Another Doubling Is Possible. Also take a look at the following article which makes the case for continued steady gains in BOOT – Two stocks I’d tuck away forever: Boot Barn Holdings (BOOT), Canadian Solar (CSIQ).
Boot Barn stock has been rallying strongly higher since the start of the year and a rising trend channel has encompassed price action. There were three major tests of the lower bound of said channel since August and buyers have defended each one of them. With the price now firmly above all the commonly looked at moving averages, it appears safe to say that buyers are in control. Technical support for near-term dips is found at $33.19. The area is considered significant as a confluence resides there. It contains a horizontal level, the 20-day moving average, and the 50-day moving average.
BOOT Chart September 2019
If you agree there’s further upside ahead for BOOT, 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 BOOT 18OCT19 30 Puts (BOOT191018P30)
Sell To Open BOOT 18OCT19 35 Puts (BOOT191018P35) for a credit of $1.23 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when BOOT was trading near $36. 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 $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $120.50 and your broker would charge a $500 maintenance fee, making your investment $379.50 ($500 – $120.50). If BOOT closes at any price above $35 on October 18, both options would expire worthless, and your return on the spread would be 32% (365% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates September 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
Tags: Auto-Trade, BOOT, Bullish Options strategies, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Option Strategy, implied volatility, Monthly Options, Options Tutorial Program, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Monthly Options, Stock Option Trading Idea Of The Week, Weekly Options | No Comments »
Monday, September 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.
CDW Corp. (CDW) Is Poised to Break to Fresh Record Highs
Several Analysts are optimistic about CDW’s outlook, take a look at what there two publications have to say – Is CDW (CDW) Outperforming Other Computer and Technology Stocks This Year? And With EPS Growth And More, CDW (NASDAQ:CDW) Is Interesting.
The most impressive part of CDW is how steadily it has been rising throughout the year. Dips in the stocks price are shallow and appear to be quickly bought up. A rising trend channel has encompassed price action and there are several layers of downside support. The first is a horizontal level that comes in just above $116. Further support comes from the 50-day moving average, currently near $113.50. The moving average is near the bottom of the trend channel and therefore is considering to be major support.
CDW Chart September 2019
If you agree there’s further upside ahead for CDW, 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 CDW 18OCT19 110 Puts (CDW191018P110)
Sell To Open CDW 18OCT19 115 Puts (CDW191018P115) for a credit of $1.18 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when CDW was trading near $118. 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 $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $115.50 and your broker would charge a $500 maintenance fee, making your investment $384.50 ($500 – $115.50). If CDW closes at any price above $115 on October 18, both options would expire worthless, and your return on the spread would be 30% (281% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates September 5, 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
Tags: Auto-Trade, Bearish Options Strategies, Bull Put Credit Spread, Bullish Options strategies, Calendar Spreads, Calls, CDW, Credit Spreads, diagonal spreads, Earnings Announcement, Earnings Option Strategy, Earnings Play, implied volatility, Monthly Options, Options Tutorial Program, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Credit Spreads, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Weekly Options | No Comments »
Monday, August 26th, 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.
Terry
Will Paycom Software (PAYC) Continue to Outperform?
PAYC has performed incredibly well this year and has significantly outperformed the markets since early August. These two analyst are expecting more upside for the stock – Why Paycom Software, Inc. (NYSE:PAYC) Looks Like A Quality Company and Is Paycom Software (PAYC) Stock Outpacing Its Computer and Technology Peers This Year?
From a technical standpoint, PAYC recently broke to record highs after climbing above resistance at $245. There is now a bit of a support confluence near the horizontal level as a rising trendline falls close to it. The stock shows strength via correlation as it has outperformed the broader markets and most of the stocks on the IBD Top 50 list. The chart below shows performance against the S&P 500 (SPY) which is marked by the gray line. Despite the index trading heavy this month, PAYC has not only manage to rally, but it has done so to new record highs which is impressive to say at the least.
PAYC Chart August 2019
If you agree there’s further upside ahead for PAYC, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least a little.
Buy To Open PAYC 20SEP19 240 Puts (PAYC190920P240)
Sell To Open PAYC 20SEP19 250 Puts (PAYC190920P250) for a credit of $4.13 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when PAYC was trading near $249. 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 $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $410.50 and your broker would charge a $1000 maintenance fee, making your investment $589.50 ($1000 – $410.50). If PAYC closes at any price above $250 on September 20, both options would expire worthless, and your return on the spread would be 70% (798% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates August 22, 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
Tags: Auto-Trade, Bearish Options Strategies, Bull Put Credit Spread, Bullish Options strategies, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Option Strategy, Earnings Play, implied volatility, Monthly Options, Options Tutorial Program, PAYC, Portfolio, Profit, profits, Puts, Risk, SPY, Stocks vs. Stock Options, TastyWorks, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »
Monday, August 19th, 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.
Terry
Visa (V) Dips – Is it Time to Get In?
One analyst recently wrote an article titled Load Up On Visa which is the type of thing usually said when there is a sharp fall in the stock discussed, in the context that it is being offered at a discount. This is certainly not the case with Visa as the correction a few weeks back was much more shallow when compared to other stocks in the sector. The headline goes to show just how positive sentiment is. Also take a look at the following article which discusses Visa’s performance compared to its sector – Is Visa (V) Stock Outpacing Its Business Services Peers This Year?
From a technical perspective, the stock dipped lower in the early month but caught a strong bid near support to erase losses. There is a horizontal level in play at $172 which seems to have been respected by the market. If offered resistance in early June, and support after a gap up later in the month. Earlier this month, the same level held the stock at the open when it gapped lower. The 50-day moving average is also in play, and it is starting to look like the stock has regained it. The overall trend in Visa is impressive and pull backs throughout the rally this year have been shallow. Another sign of strength is how stable the stock was in the past week while the markets were generally volatile and under pressure.
V Chart August 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, at least a little bit.
Buy To Open V 20SEP19 175 Puts (V190920P175)
Sell To Open V 20SEP19 180 Puts (V190920P180) for a credit of $2.06 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when V was trading near $178. 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 $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $203.50 and your broker would charge a $500 maintenance fee, making your investment $296.50 ($500 – $203.50). If V closes at any price above $180 on September 20, both options would expire worthless, and your return on the spread would be 69% (787% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates August 15, 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
Tags: Auto-Trade, Bearish Options Strategies, Bullish Options strategies, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Option Strategy, implied volatility, Monthly Options, Options Tutorial Program, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, TastyWorks, Terry's Tips, thinkorswim, V, Visa, Volatility, Weekly Options
Posted in 10K Strategies, Credit Spreads, Earnings Announcement Options Strategy, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »
Monday, August 12th, 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.
Terry
Ulta Beauty (ULTA) Looks Poised to Break to Fresh Record Highs
Several analysts are optimistic regarding Ulta Beauty’s stock price following their recent earnings surprise, here are two of them – Why the Earnings Surprise Streak Could Continue for Ulta (ULTA) and How one retailer is beating the odds.
From a technical standpoint, ULTA has held above prior support near $330 and bounced higher. In the advance from the level, it has retaken both the 50 and 100-day moving averages. What’s most impressive about ULTA is the longer-run trend as the stock is up more than 40% YTD already. Considering the strong trend, and lack of bearish evidence, the path seems to be to the upside for ULTA with an aim of breaking to new record highs above $370.
ULTA Chart August 2019
If you agree there’s further upside ahead for ULTA, 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 ULTA 13Sep19 342.5 Puts (ULTA190913P342.5)
Sell To Open ULTA 13Aug19 345 Puts (ULTA190913P345) for a credit of $1.13 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when ULTA was trading near $347. 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 $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $110.50 and your broker would charge a $250 maintenance fee, making your investment $139.50 ($250 – $110.50). If ULTA closes at any price above $345 on August 13, both options would expire worthless, and your return on the spread would be 79% (901% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates August 8, 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
Tags: Auto-Trade, Bullish Options strategies, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Option Strategy, Earnings Play, implied volatility, Monthly Options, Options Tutorial Program, Portfolio, Profit, profits, Puts, Risk, SPY, Stocks vs. Stock Options, TastyWorks, Terry's Tips, thinkorswim, ULTA, Volatility, Weekly Options
Posted in 10K Strategies, Coffee Can Investing, Credit Spreads, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Weekly Options | No Comments »
Monday, August 5th, 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.
Terry
Consider Essent Group (ESNT) Following Their Earnings Report
ESNT reported earnings in the past week and despite an early day dip, the stock managed to close higher on the day. The following article provides a view on why the stock could continue higher – 2 Stocks Poised to Thrive in Volatile Times: Essent Group Ltd., Cognex Corporation. Also take a look at this article which discusses the earnings report and the declaration of a new dividend – Essent Group Ltd. Reports Second Quarter 2019 Results & Declares Inaugural Dividend.
There are two significant things going for ESNT from a technical perspective. First, the stock dipped below major support at $45.38 on Friday but managed to close above it. This has resulted in a hammer candle which is a popular candlestick that signals the potential for a reversal. This pattern is not just seen on a daily chart, it is also present on a weekly chart and even on a 4-hour chart. The horizontal level is considered significant as it triggered a major turn last year and as it has acted as support in recent months. The fact that the candlestick pattern printed above such a significant level strengthens it. The other thing going for the stock is that it managed to close higher despite an overall heavy tone in the markets on Friday. This divergence is quite important as the markets look a bit heavy following the price action in the past week.
ESNT Chart August 2019
If you agree there’s further upside ahead for ESNT, consider this trade which is a bet that the stock will continue to advance over the next seven weeks, or at least not decline very much.
Buy To Open ESNT 20SEP19 40 Puts (ESNT190920P40)
Sell To Open ESNT 20SEP19 45 Puts (ESNT190920P45) for a credit of $1.68 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when ESNT was trading near $46. 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 $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $165.50 and your broker would charge a $500 maintenance fee, making your investment $334.50 ($500 – $165.50). If ESNT closes at any price above $45 on September 20, both options would expire worthless, and your return on the spread would be 49% (389% annualized).
IBD Underlying Updates August 1, 2019
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
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
Tags: Auto-Trade, Bearish Options Strategies, Bullish Options strategies, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Option Strategy, ESNT, implied volatility, Monthly Options, Options Tutorial Program, Portfolio, Profit, profits, Puts, Risk, SPY, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Coffee Can Investing, Credit Spreads, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »
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