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Posts Tagged ‘Puts’

Should you Buy the Dip in Zoom Video Communications (ZM)?

Monday, April 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.

Zoom’s stock price corrected lower in the past week on privacy and other concerns. The question at this point is whether investors will see value after a more than 20% drop from the high. The following article discusses the concerns investors are faced with and how the company CEO is addressing them –  Zoom says it topped 200 million daily participants in March as CEO addresses privacy concerns. Also take a look at this article which highlights why ZM is an attractive stock, particularly at this time – 4 Tech Stocks Boosted by Remote Schooling Sessions.

Technicals

A confluence of support held ZM higher in the past week. It consists of a horizontal level at $120, which was prior resistance in late February and early March, and a rising trendline that dates back to late January. While above this area, the stock has the potential to extend higher, at least towards the next level of interest which falls at $135.

ZM Chart April 2020 dip from COVID-19 overload

ZM Chart April 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 08MAY20 120 Puts (ZM200508P120)
Sell To Open ZM 08MAY20 125 Puts (ZM200508P125) for a credit of $2.68 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ZM was trading near $128.  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 $266.70 and your broker would charge a $500 maintenance fee, making your investment $233.30 ($500 – $266.70).  If ZM closes at any price above $125 on May 08, both options would expire worthless, and your return on the spread would be 114% (1300% annualized).

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

IBD Underlying Updates April 4, 2020

IBD Underlying Updates April 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

Has Alibaba (BABA) Reversed Into a Bullish Trend?

Monday, March 30th, 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 markets bouncing higher, news outlets have started publishing articles on where big investors are putting their money. Have a look at what these two articles have to say about Alibaba – Bullish investors pour money into Alibaba, Amazon, Intel and Microsoft and 5 Stocks Top Earners Steven Cohen and David Tepper Agree On.

Technicals

BABA has bounced higher from an important technical support confluence that consists of a rising trendline and a horizontal level. The trendline originates from a low posted at the end of 2018 and the while the stock holds above it, the broader bullish looks to still be intact. Since turning from this support confluence, BABA has regained it’s 200-day moving average which is encouraging for bulls. Buyers should defend dips towards the trendline to maintain the upward momentum. A possible near-term target is found at $211 which has previously acted as both support and resistance.

BABA Chart March 2020 bullish trend

BABA Chart March 2020

If you agree there’s further upside ahead for BABA, 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 BABA 08MAY20 185 Puts (BABA200508P185)
Sell To Open BABA 08MAY20 187.5 Puts (BABA200508P187.5) for a credit of $1.03 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when BABA 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 $101.70 and your broker would charge a $250 maintenance fee, making your investment $148.30 ($250 – $101.70).  If BABA closes at any price above $187.5 on May 08, 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 March 28, 2020

IBD Underlying Updates March 28, 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

Domino’s Pizza (DPZ) is on a Hiring Spree to Meet a Pickup in Demand

Monday, March 23rd, 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.

Amidst all the Coronavirus chaos, Domino’s Pizza is busy searching for new workers to meet a recent increase in demand. Check out the following two articles for more details – Domino’s expects to hire 10,000 workers and Why Domino’s, Wendy’s, and Papa John’s Are Absolutely Soaring Thursday.

Technicals

DPZ recently broke above a horizontal level at $299 which is considered to be significant as the same level served the hold the stock lower on several attempts since the summer last year. The initial break higher followed its earnings report last month. The stock has pulled back since then and is currently being held higher by the same price point as well as the 200-day moving average. From a technical point of view, this is an area where the stock can reverse back into an uptrend after pulling back over the last month.

DPZ Chart March 2020 hiring among COVD-19 outbreak

DPZ Chart March 2020

If you agree there’s further upside ahead for DPZ, 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 DPZ 24APR20 295 Puts (DPZ200424P295)
Sell To Open DPZ 24APR20 300 Puts (DPZ200424P300) for a credit of $2.23 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when DPZ was trading near $300.  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 $221.70 and your broker would charge a $500 maintenance fee, making your investment $278.30 ($500 – $221.70).  If DPZ closes at any price above $300 on April 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 March 21, 2020

IBD Underlying Updates March 21, 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

Emergent (EBS) Rallies as CEO Discusses Plans of Coronavirus Vaccine Development

Monday, March 16th, 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.

A few biotech companies are rallying as investors are encouraged by the prospect of a Coronavirus vaccine, and EBS is one of them. The following two articles discuss the matter in detail –  Emergent (EBS) Begins Development of Treatments for COVID-19 and Emergent BioSolutions CEO Talks Coronavirus Vaccine Development.

Technicals

EBS is an outperformer and posted its highest weekly close since 2018 in the past week. In the process, the stock has overtaken a major horizontal resistance level at $66 that proved to be a hurdle on a few attempts between 2019 and 2020. On a weekly chart, the stock has posted a strong upside candle that erases several weeks of declines which can be seen as a bullish signal. Further, the stock is in a clear uptrend since bottoming out in late August and the recent upward momentum suggests the bullish trend remains intact.

EBS Chart March 2020 Covid-19 response

EBS Chart March 2020

If you agree there’s further upside ahead for EBS, 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 EBS 17APR20 65 Puts (EBS200417P65)
Sell To Open EBS 17APR20 70 Puts (EBS200417P70) for a credit of $1.78 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when EBS was trading near $69.  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 EBS closes at any price above $70 on April 17, 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 March 14, 2020

IBD Underlying Updates March 14, 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

Buy the Dip in Microsoft (MSFT)

Monday, February 24th, 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’s stock price dipped in the past week and these two following articles point out several reasons why investors might want to take advantage of the dip – Microsoft (MSFT): Strong Industry, Solid Earnings Estimate Revisions, and 3 Reasons Microsoft Has More Growth Ahead of It.

Technicals

While MSFT corrected lower last week, downward momentum is lacking when compared to prior weeks. The stock is currently testing the 20-day moving average which is an indicator MSFT has not traded below on a sustained basis in at least six months. Further support is seen at $174 which is a horizontal level near that acted as resistance last month. The strongest appeal to this stock is that the upward momentum has been increasing since it broke out in late October, and this upward momentum has not been negated by the recent dip. It would take a sustained drop below $174 to alter the near-term outlook for MSFT.

MSFT Chart February 2020 buy in dip

MSFT Chart February 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 27MAR20 175 Puts (MSFT200327P175)
Sell To Open MSFT 27MAR20 177.5 Puts (MSFT200327P177.5) for a credit of $0.98 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MSFT was trading near $179.  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 $96.70 and your broker would charge a $250 maintenance fee, making your investment $153.30 ($250 – $96.70).  If MSFT closes at any price above $177.5 on March 27, both options would expire worthless, and your return on the spread would be 63% (719% annualized).

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

IBD Underlying Updates February 22, 2020

IBD Underlying Updates February 22, 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

Alibaba (BABA) – a Stock to Buy Following Earnings

Monday, February 17th, 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.

Alibaba’s earnings came in ahead of expectations and, as per MarketWatch, three analysts have revised up their price targets since. Take a look at the following article which discusses how the Coronavirus might alter consumer behavior to Alibaba’s benefit –  Alibaba’s Looking For Black Swan Opportunities, and also check out this article published by Zack’s which breaks down the earnings report – Alibaba (BABA) Surpasses Q3 Earnings & Revenue Estimates.

Technicals

Earlier this year, BABA scaled above the 2018 high of $212 to trade at a fresh record high. There was a correction since, however, the price action over the past few weeks shows the stock regaining some momentum and holding above the prior high which is now viewed as support. Further, the 50-day moving average comes into play and held the stock higher on a dip earlier this month. A rally above recent highs at $226 can offer confirmation of a bullish continuation while it would take a sustained drop below $212 to alter the near-term bullish view.

BABA Chart February 2020 vertical options spread

BABA Chart February 2020

If you agree there’s further upside ahead for BABA, 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 BABA 20MAR20 215 Puts (BABA200320P215)
Sell To Open BABA 20MAR20 220 Puts (BABA200320P220) for a credit of $2.20 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when BABA was trading near $220.  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 $218.70 and your broker would charge a $500 maintenance fee, making your investment $281.30 ($500 – $218.70).  If BABA closes at any price above $220 on March 20, both options would expire worthless, and your return on the spread would be 78% (890% annualized).

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

IBD Underlying Updates February 15, 2020

IBD Underlying Updates February 15, 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

New Oriental Education & Technology (EDU) is Regaining Strength After a Brief Dip

Monday, February 10th, 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.

After a brief dip following the latest earnings report, New Oriental Education & Technology is showing renewed upward momentum. The technical charts suggest that the stock is ready to move higher and the Investor Business Daily recently published an article along the same lines – Stock Upgrades: New Oriental Education & Technology Gets High Marks For Relative Strength. Also check out the following article on SeekingAlpha which provides an outlook following the recent earnings report – New Oriental Education: Quality Compounder At A Reasonable Price.

Technicals

EDU has been trading in an upward trend channel since it bottomed at the start of last year. The recent decline that followed the earnings report was held higher by the lower bound of this channel and while the trend channel remains in play, the technical outlook remains bullish. In the past week, the stock rallied above, $131 which was important resistance late last month. In the process, it’s made a sequence of higher highs and higher lows from the January low which supports the view that the stock has resumed within its broader uptrend.

EDU Chart February 2020 vertical put spread

EDU Chart February 2020

If you agree there’s further upside ahead for EDU, 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 EDU 20MAR20 130 Puts (EDU200320P130)
Sell To Open EDU 20MAR20 135 Puts (EDU200320P135) for a credit of $2.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when EDU was trading near $13.50.  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 $216.70 and your broker would charge a $500 maintenance fee, making your investment $283.30 ($500 – $216.70).  If EDU closes at any price above $135 on March 20, both options would expire worthless, and your return on the spread would be 76% (750% annualized).

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

IBD Underlying Updates February 9, 2020

IBD Underlying Updates February 9, 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

ServiceNow (NOW) Stock Breaks Out On Earnings Beat

Monday, February 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.

ServiceNow stock advanced sharply higher in the past week after earnings came in better than expected. Here is what two analysts have to say about the recent earnings report – Service Now’s (NOW) Q4 Earnings Beat, Revenues Rise Y/Y and ServiceNow (NYSE:NOW) PT Raised to at Jefferies Financial Group.

Technicals

The earnings report in the past week has triggered a technical breakout in NOW which trades at all-time highs. The technical charts suggest the upward momentum will continue while the stock holds above the breakout point at $319. The upper bound of a rising trend channel is within proximity and this might trigger a near-term consolidation while an upward break of it would be indicative of rising upward momentum.

NOW Chart February 2020 upward momentum

NOW Chart February 2020

If you agree there’s further upside ahead for NOW, 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 NOW 13MAR20 330 Puts (NOW200213P330)
Sell To Open NOW 13MAR20 335 Puts (NOW200213P335) for a credit of $1.89 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when NOW was trading near $338.  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 $187.70 and your broker would charge a $500 maintenance fee, making your investment $312.30 ($500 – $187.70).  If NOW closes at any price above $335 on March 13, both options would expire worthless, and your return on the spread would be 60% (562% annualized).

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

IBD Underlying Updates February 2, 2020

IBD Underlying Updates February 2, 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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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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