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.
Can Match Group (MTCH) Continue to Outperform?
Analysts are keeping a close eye on MTCH, take a look at these two articles to see what they are saying about the stock – Worth taking a quick glance: Match Group, Inc. and Match Group Starting to Look Attractive.
The main technical appeal to MTCH is its outperformance relative to the overal markets. Note the stock is about 16% higher to the low posted in late November while SPY dropped abruptly to fresh yearly lows in the past week. As well, the stock boasts a 24% gain for the year, despite the decline from September highs. Major support is found at $33.50 and this level held MTCH higher last month. Support is also seen near $39, reflecting the high ahead of the earnings inspired gap up in August. From a technical standpoint, there is a large gap that should be covered by a $48 price at some point (as the earlier upside gap was eventually covered).
If you agree there’s further upside ahead for MTCH, consider this trade which is a bet that the stock will continue to advance over the next four weeks, or at least a little bit.
Buy To Open MTCH 18JAN19 36 Puts (MTCH190118P36)
Sell To Open MTCH 18JAN19 39 Puts (MTCH190118P39) for a credit of $1.10 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when MTCH was trading near $39. 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 $300 maintenance fee, making your investment $192.50 ($300 – $107.50). If MTCH closes at any price above $39 on January 18, both options would expire worthless, and your return on the spread would be 56% (818% 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.