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. The 2017 trading year is over. The 10 option portfolios carried out at Terry’s Tips gained an average of 113% for the year. Only one portfolio lost money, and four of them earned over 100%. It was the best year in our 16-year history. We look forward to a similar outcome in 2018. We invite you to come along for the ride.
Fleetcor Technologies (FLT) Likely to Cross $200 Mark
Two recent analyst upgrades suggest Fleetcor Technologies stock will cross the $200 point as Deutsche Bank has raised their price targets to $225 and Jefferies has raised their target to $218.
FLT posted a sixth consecutive week of gains in the past week and closed at an all-time record high. In fact, the stock has only had three down weeks in the last 19 and each one of those declines was not very significant. A rising trendline is in play that originates from a low posted in September and offers support near the $190 price point where the 20-period daily moving average is also found to add confluence.
If you agree there’s further upside ahead for Fleetcor Technologies, 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 FLT 16Feb18 185 Puts (FLT180216P185)
Sell To Open FLT 16Feb18 190 Puts (FLT180216P190) for a credit of $1.78 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when FLT was trading near $192. 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 $176 and your broker would charge a $500 maintenance fee, making your investment $324 ($500 – $176). If FLT closes at any price above $190 on February 16, 2018, both options would expire worthless, and your return on the spread would be 54% (431% 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.