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.
Last week, the market (SPY) enjoyed its best week in 7 years. The 8 real-life option portfolios carried out by Terry’s Tips shared in the good news. Our composite portfolio value gained 27% for the week, one of our best weeks ever.
Can Intel Corp. (INTC) Overcome The $50 Psychological Barrier?
From a technical perspective, INTC is facing a wall of resistance consisting of the psychological $50 barrier as well as the 200-day moving average. However, the stock is seen consolidating below this resistance zone through out the month of November within a relatively small range which signals a lack of selling pressure. This type of price action usually suggests that the bears are not in control and that the stock may well be on the verge of breaking higher. As well, on a weekly chart, INTC posted a bullish engulfing candle as a result of price action in the past week which signals strength and favors a continuation higher.
If you agree there’s further upside ahead for INTC, consider this trade which is a bet that the stock will continue to advance over the next six weeks, at least a little bit.
Buy To Open INTC 11JAN18 47 Puts (INTC180111P47)
Sell To Open INTC 11JAN18 50 Puts (INTC180111P50) for a credit of $1.11 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when INTC was trading near $49. 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 $108.50 and your broker would charge a $300 maintenance fee, making your investment $191.50 ($300 – $108.50). If INTC closes at any price above $50 on January 11, both options would expire worthless, and your return on the spread would be 57% (533% annualized).
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.