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. The Terry’s Tips actual portfolio that trades these ideas has gained 164% so far in 2019. As always, future results can’t be assured to be as good, but we are pleased with the results so far.
Will MasTec’s (MTZ) Growth Prospects Keep the Stock Bid?
MasTec’s recent earnings report exceeded expectations and several analysts believe growth trends will continue, here are two of them – MasTec’s 2018 Results: A Lot to Like Here and Will MasTec Earnings Grow Over The Next Year?
Although a daily chart is displayed below, the strongest technical indicator for MTZ is seen on a weekly chart where the stock regained it’s 100 moving average on a sustained basis. The daily chart confirms the uptrend as the stock is held within a rising trend channel. The stock has held above a horizontal level at $47.30 in recent sessions, this is a level that was well respected resistance for most of 2018 on several attempts. Further support in the event of a dip lower is seen near $45.55 where a horizontal level is found as well as the 20-day moving average.
If you agree there’s further upside ahead for MZT, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.
Buy To Open MZT 18APR19 44 Puts (MZT190418P44)
Sell To Open MZT 18APR19 47 Puts (MZT190418P47) for a credit of $0.85 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when MZT was trading near $48. 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 $82.50 and your broker would charge a $300 maintenance fee, making your investment $217.50 ($300 – $82.50). If MZT closes at any price above $47 on April 18, both options would expire worthless, and your return on the spread would be 38% (433% 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.