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 identify outperforming stocks and place spreads that take advantage of the underlying trend and momentum.
I did want you to know that the 10 actual option portfolios carried out at Terry’s Tips for paying subscribers reached an important milestone this week. These portfolios use a variety of pre-determined options strategies and differing underlying stocks or ETPs. If you had invested in all 10 portfolios in January 2017, you would have invested $48,600. This week, the composite value of those portfolios reached $97,742, a gain of 101%. For the first time, we are up 100% for the year. A milestone to celebrate! Isn’t it time that you learned how we did it so that you could enjoy these kinds of returns in your own investment account?
Is SVB Financial Group (SIVB) Ready To Continue Higher After The Price Correction?
SIVB recently broke higher from a correction that had taken place since March. The stock price started trending higher in late September and made a series of technical breaks by regaining its 200-period daily moving average and breaking above a declining trend channel that had encompassed the roughly six-month correction.
SIVB corrected lower last week following the technical break but turned higher after retesting the broken trend channel, slightly ahead of the 200-period daily moving average. The stock price ended the week near 189.50 after a gap higher inspired by the earnings report, taking out resistance at 186.09 which was a hurdle in May and August. The trend channel which is found on a daily chart resembles a flag pattern and the recent upside break signals a bullish continuation.
If you agree there’s further upside ahead for SVB Financial Group, consider this trade which is a bet that the stock will continue to advance at least a little bit over the next four weeks.
Buy To Open SIVB 17Nov17 185 Puts (SIVB171117P185)
Sell To Open SIVB 17Nov17 190 Puts (SIVB171117P190) for a credit of $2.08 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when SIVB was trading near $189.50. 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 $206 and your broker would charge a $500 maintenance fee, making your investment $294 ($500 – $206). If SIVB closes at any price above $190 on November 17, 2017, both options would expire worthless, and your return on the spread would be 70% (1023% 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.