from the desk of Dr. Terry F Allen

Skip navigation

Member Login  |  Contact Us  |  Sign Up

support@terrystips.com

Will Essent Group (ESNT) Continue the Momentum?

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 portfolios to spot outperforming stocks and place spreads that take advantage of the momentum.

Terry

Will Essent Group (ESNT) Continue the Momentum?

Essent Group has received a lot of attention as of late and several analysts are expecting more upside in the stock price.  Here are two of them – Essent Group Earns Outperform Rating from Analysts at Wells Fargo & Company and Zacks: Analysts Anticipate Essent Group Ltd. Will Announce Earnings of $0.77 Per Share.

ESNT has recently seen a pickup of upside momentum after a consolidating mostly sideways from early in the year.  The stock broke to fresh record highs late last month and a correction in the second half of last week ended with a bullish engulfing candle on a daily chart, suggestion a continuation of the predominant bullish trend.

ESNT Chart December 2017

ESNT Chart December 2017

*source Tradingview.com

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

Buy To Open ESNT 19Jan18 40 Puts (ESNT180119P040)
Sell To Open ESNT 19Jan18 45 Puts (ESNT180119P045) for a credit of $1.38 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when EA was trading near $45.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $136 and your broker would charge a $500 maintenance fee, making your investment $364 ($500 – $136).  If ESNT closes at any price above $45 on January 18, 2018, both options would expire worthless, and your return on the spread would be 37% (296% annualized).

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

IBD Underlying Updates December 1, 2017

IBD Underlying Updates December 1, 2017

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

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

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

Member Login  |   Programs and Pricing  |  Testimonials  |  About Us  |  Terms and Conditions  |  Accessibility Statement  |  Privacy Policy  |  Site Map

Options are not suitable for all investors as the special risks inherent to options trading my expose investors to potentially rapid and substantial losses. Please read Characteristics and Risks of Standardized Options before investing in options

© Copyright 2001-2022 Terry's Tips, Inc. dba Terry's Tips
235 Primrose Lane, Ferrisburgh, VT 05456