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*Tip of the Day does not reflect current trades; it is strictly for informational purposes. To receive Chuck Hughes handpicked trades as they happen, call 866-661-5664 or www.chuckhughesonline.com.

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February 29th, 2024

Breaking Down XLF’s Technical ‘Buy’

On February 28th, we looked at a Daily Price Chart for the SPDR S&P Retail ETF, noting that XRT has been making a series of new 52-Week Highs.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for the Financial Select Sector SPDR ETF, symbol: XLF.

Before breaking down XLF’s daily chart let’s first review the investment objective of the ETF.

The Financial Select Sector SPDR Fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Financial Select Sector Index. 

Now, let’s begin to break down the Daily Price chart for the XLF ETF.

Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for XLF.

50-Day EMA and 100-Day EMA ‘Buy’ Signal

The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the ETF price is moving.

  • 50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal
  • 50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal

When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the ETF’s buying pressure has begun to outweigh the selling pressure signaling a ‘buy’ signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a ‘sell’ signal.

Buy the XLF ETF

As the chart shows, on November 17th, the XLF 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for XLF exceeded the selling pressure. For this kind of crossover to occur, an XLF has to be in a strong bullish trend.

Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.

As long as the 50-Day EMA remains above the 100-Day EMA, the ETF is more likely to keep trading at new highs and should be purchased.

Our initial price target for the XLF ETF is 42.50 per share.

109.5% Profit Potential for XLF Option

Now, since XLF’s 50-Day EMA is trading above the 100-Day EMA this means the ETF’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an XLF call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat XLF price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following XLF option example, we used the 1% Rule to select the XLF option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select an XLF in-the-money option strike price, the XLF ETF only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying ETF closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if XLF is flat at 40.36 at option expiration, it will only result in a 4.8% loss for the XLF option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to ETFs.

The prices and returns represented below were calculated based on the current ETF and option pricing for XLF on 2/28/2024 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying ETF continues to move up in price.

For this specific call option, the calculator analysis below reveals if XLF increases 5.0% at option expiration to 42.38 (circled), the call option would make 52.4% before commission. 

If XLF increases 10.0% at option expiration to 44.40 (circled), the call option would make 109.5% before commission and outperform the ETF return nearly 11 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish ETFS.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

February 27th, 2024

Momentum Drives Vertiv’s Bullish Surge

It can be difficult to find the best new opportunity by just looking at the daily chart for a stock. That’s why I use indicators that highlight trends that are occurring “under the surface” to better pick my trades.

Today we are going to look at one of my favorite indicators along with my newest pick that it helped me spot! Then we will look at an option trade for the stock and see how options allow us to amplify potential returns while also providing downside protection for our trades.

On February 27th Trade of the Day we will be looked at an On Balance Volume chart for Vertiv Holdings, LLC stock symbol: VRT.

Vertiv Holdings Co, together with its subsidiaries, designs, manufactures, and services critical digital infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial environments in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. It offers AC and DC power management products, switchgear and busbar products, thermal management products, integrated rack systems, modular solutions, and management systems for monitoring and controlling digital infrastructure.

Confirming a Price Uptrend with OBV

The VRT daily price chart below shows that VRT is in a price uptrend as the current price is above the price VRT traded at six months ago (circled). The On Balance Volume chart is below the daily chart.

On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line.

Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. 

We can see from the OBV chart below that the On Balance Volume line for VRT is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure.

‘Buy’ Signal for VRT

Since VRT’s OBV line is sloping up, the most likely future price movement for VRT is up, making VRT a good candidate for a stock purchase or a call option spread.

Let’s use the Hughes Optioneering calculator to look at the potential returns for a VRT debit spread.

How Option Spreads Build in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $310 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if VRT stock is flat, up at all, or down 7.5% at expiration the spread will realize a 61.3% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 61.3% profit potential when the trade was identified*.
The prices and returns represented below were calculated based on the current stock and option pricing for VRT on 2/26/2024 before commissions.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

*Trading incurs risk and some people lose money trading.

 

Optioneering Video from January 7, 2024 PDD

 

February 22nd, 2024

Industrial Truck-Maker Booming Higher

On Feb 21st, I am going to walk you through a great potential trade. Not only will we look at which ticker is setting up, I will layout the amazing indicator that helped me spot this one and many others.

In this example chart of PACCAR, Inc. (PCAR), the On Balance Volume is showing us what we need to know.

Confirming a Price Uptrend with OBV

On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line.

We can see from the OBV chart below that the On Balance Volume line for PCAR is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability.

Confirmed ‘Buy’ Signal for PCAR

Since PCAR’s OBV line is sloping up, the most likely future price movement for PCAR is up, making PCAR a good candidate for a stock purchase or a call option spread.

Let’s use the Hughes Optioneering calculator to look at the potential returns for a PCAR debit spread.

 

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $300 (circled).

The analysis reveals that if PCAR stock is flat, up at all, or down 7.5% at expiration the spread will realize a 66.7% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 66.7% profit potential when the trade was identified*.

The prices and returns represented below were calculated based on the current stock and option pricing for PCAR on 2/21/2024 before commissions.

*Trading incurs risk and some people lose money trading.

February 20th, 2024

Apollo Soars to New Highs!

On Friday February 16th, we looked at a Daily Price Chart of TJX Cos., Inc., noting that TJX’s OBV line was sloping up, validating the stock’s recent bullish trend.

For today’s Trade of the Day we will be looking at a Daily Price chart for Apollo Global Management LLC (APO).

Apollo Global Management, Inc. is a private equity firm specializing in investments in credit, private equity and real estate markets. The firm’s private equity investments include traditional buyouts, recapitalization, distressed buyouts and debt investments in real estate, corporate partner buyouts, distressed asset, corporate carve-outs, middle market, growth capital, turnaround, bridge, corporate restructuring, special situation, acquisition, and industry consolidation transactions.

Now, let’s begin to break down the Daily Price chart for APO. Take a look at the chart below.

Time to Buy APO

The Daily Price chart above shows that APO stock has been hitting new 52-Week Highs regularly since late January.

Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.

The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.

You see, after a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased.

Our initial price target for APO stock is 120.00 per share.

Now, since APO stock is currently making a series of new 52-Week Highs this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an APO call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat APO price to a 12.5% increase.

The prices and returns represented below were calculated based on the current stock and option pricing for APO on 2/16/2024 before commissions.

 

 

Optioneering Video from December 31, 2023 APP

 

On February 15th, 2024 we shared

Buy CRH’s Strong Trend?

Did you spot this potential trade? If I hadn’t dialed in my options tools, I may have missed it as well. The company we are looking at today is CRH, PLC (CRH).

CRH plc, through its subsidiaries, manufactures and distributes building materials in Ireland and internationally. It operates through three segments: Americas Materials, Europe Materials, and Building Products. The company manufactures and supplies cement, lime, aggregates, precast, ready mixed concrete, and asphalt products; concrete masonry and hardscape products comprising pavers, kerbs, retaining walls, and related patio products. 

Now, let’s begin to break down the Daily Price chart for CRH stock. Check out the chart below.

Time to Buy CRH

As the chart shows, on November 25th, 2022 the CRH 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for CRH stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend.

Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.

How I Put the Odds in My Favor

Now, since CRH’s 50-Day EMA is trading above the 100-Day EMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a CRH call option spread.

For this option spread, the calculator analysis below reveals the cost of the spread is $425 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if CRH stock is flat or up at all at expiration the spread will realize a 76.5% return (circled). 

And if CRH stock decreases 7.5% at option expiration, the option spread would make a 56.3% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 76.5% profit potential when the trade was identified*.

The prices and returns represented below were calculated based on the current stock and option pricing for CRH on 2/14/2024 before commissions.

*Trading incurs risk and some people lose money trading.

 

MOMENTUM BUILDS BEHIND INSURER BRO

Today I am going to walk you through a great potential trade. Not only will we look at which ticker is setting up, I will layout the amazing indicator that helped me spot this one and many others.

For yesterday, Trade of the Day e-letter we will be looking at a Moving Average Convergence/ Divergence (MACD) chart for Brown & Brown Inc. stock symbol: BRO.

Brown & Brown, Inc. markets and sells insurance products and services primarily in the United States and other parts of the world. The company reports through four segments: The Retail segment provides a broad range of insurance products and services to commercial, public and quasi-public entities and to professional and individual customers. 

MACD Buy Signal

The BRO daily price chart below shows that BRO is in a price uptrend as the 24/52 day MACD line (black line) is above the 18-Day EMA (purple line). The Moving Average Convergence/ Divergence chart is shown below the daily price chart.

The 18-Day EMA line functions as a buy/sell ‘trigger’. When the 24/52 Day MACD line crosses above the 18-Day EMA line it indicates positive momentum and higher prices for the stock.

 

Buy BRO Stock

As long as the 24/52 Day MACD line remains above the 18-Day EMA, the stock is more likely to keep trading at new highs in the coming days and weeks.

Since BRO’s bullish run is likely to continue, the stock should be purchased.

114.4% Profit Potential for BRO Option

Now, since BRO’s 24/52 Day MACD is trading above the 18-Day EMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a BRO call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat BRO price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following BRO option example, we used the 1% Rule to select the BRO option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a BRO in-the-money option strike price, BRO stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if BRO stock is flat at 80.95 at option expiration, it will only result in a 9.2% loss for the BRO option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for BRO on 2/13/2024 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if BRO stock increases 5.0% at option expiration to 85.00 (circled), the call option would make 52.6% before commission. 

If BRO stock increases 10.0% at option expiration to 89.05 (circled), the call option would make 114.4% before commission and outperform the stock return more than 11 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

 

Optioneering Video from December 24, 2023 SYM 

 

BUILDING PORTFOLIO INFRASTRUCTURE WITH URI

 

Chuck Hughes here. I just found a great trade set up for URI that I wanted to highlight for you. This example will show you how I’m able to profit 81.8% when a stock increases in price, stays flat, or even drops -7.5%. I know, it sounds too good to be true. But let me walk you through it.

United Rentals, Inc. (URI) is the largest equipment rental company in the world, with an integrated network of rental locations in United States, Canada and Europe. The company’s customer base includes construction and industrial companies, utilities, municipalities, government agencies, independent contractors and homeowners and other individuals that use equipment for projects that range from simple repairs to major renovations. 

Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for URI.

Time to Buy?

As the chart shows, on June 21st, the URI 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for URI stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend.

Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.

As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs and should be purchased.

Increasing the Odds of Profitability

Now, since URI’s 50-Day EMA is trading above the 100-Day EMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a URI call option spread.

The analysis reveals that if URI stock is flat or up at all at expiration the spread will realize an 81.8% return (circled). 

And if URI stock decreases 7.5% at option expiration, the option spread would make an 81.8% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 81.8% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader. 

 

CB’S SURGE: INSURANCE STOCKS TRIUMPH

 

Did you spot this potential trade? If I hadn’t dialed in my options tools, I may have missed it as well. You may recognize the company we are looking at today, Chubb Ltd. (CB). But even if you don’t, what you really need is the chart.

When I was a pilot I couldn’t fly by just looking out the window. I had to use my gauges and instruments. Stock charts are similar to those gauges and make it possible to be more accurate in spotting great set ups.

On this chart we are going to look at the 10-Month Simple Moving Average. If you want more info on this indicator, click here.

As the chart shows, in September, the CB 1-Month Price, crossed above the 10-Month simple moving average (SMA).

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased.

The good news is CMG is still above the 10-Month SMA so it has solid momentum to the upside and conditions are ripe for a bullish trade. But with just a couple more simple steps we can increase the potential for this trade using options.

How To Juice Up The Horsepower Using Options

Now, since CB’s 1-Month Price is trading above the 10-Month SMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a CB call option purchase.

Take a look at the calculator below.

For this specific call option, the calculator analysis below reveals if CB stock increases 5.0% at option expiration to 261.71 (circled), the call option would make 76.9% before commission. 

If CB stock increases 10.0% at option expiration to 274.18 (circled), the call option would make 159.4% before commission and outperform the stock return nearly 16 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

*Trading incurs risk and some people lose money trading.

Optioneering Video from December 17, 2023 IMVT

 

 

TIME TO BUY THE DIP FOR BWXT?

Posted by Chuck Hughes | Feb 1, 2024 | Chuck's Trade of the Day

 

​On Jan 31st, we looked at a Daily Price Chart of Check Point Software Technologies, Ltd., noting that CHKP has been making a series of new 52-Week Highs recently.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for BWX Technologies, Inc. stock symbol: BWXT.

Before breaking down BWXT’s daily Keltner Channel chart let’s first review which products and services are offered by the company.

BWX Technologies, Inc. supplies precision manufactured components and services to the commercial nuclear power industry. The company offers technical, management and site services to governments in complex facilities and environmental remediation activities.

Unlock Chuck’s trading insights with our free text alerts! Join now for expert tips, live event notifications, and exclusive discounts.

Now, let’s begin to break down the Keltner Channel chart for BWXT. Below is a Daily Price Chart and the three Keltner Channels for BWXT stock.

  

Buy BWXT Stock

The Hughes Optioneering Team uses the Keltner Channels as an indicator to determine whether a stock is overbought or oversold. If a stock’s daily stock price is trading above the upper Keltner Channel, this signals that the stock is temporarily overbought and subject to a retracement.

Even stocks that are in the strongest bull trends do not advance in a straight line. There are always price retracements along the way. When a stock becomes overbought, its price will typically decline soon after as the inevitable profit taking occurs.

The BWXT daily price chart shows that the stock is in a strong price uptrend and has become overbought several times. You can see this as BWXT has traded above the Upper Keltner Channel on multiple occasions recently.

But, in every scenario when BWXT became overbought, the stock soon experienced a pullback.

Finding opportunities when a stock experiences a pullback is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point.

The Keltner Channel “Buy Zone” occurs when a stock is trading below the upper Keltner Channel. Once the daily price is trading below the upper channel, it provides a lower-risk buying opportunity as the stock is likely to rally.

Our initial price target for BWXT stock is 86.50 per share.

Profit if BWXT is Up, Down or Flat

Now, since BWXT is currently trading in the Keltner Channel ‘Buy Zone’ this offers a prime trade entry opportunity. Let’s use the Hughes Optioneering calculator to look at the potential returns for a BWXT call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in BWXT stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for BWXT on 1/31/2024 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $330 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if BWXT stock is flat or up at all at expiration the spread will realize a 51.5% return (circled). 

And if BWXT stock decreases 7.5% at option expiration, the option spread would make a 51.5% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 51.5% profit potential when the trade was identified*.

Managing Trade Cost

One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, or Netflix for as little as $350. With an option spread you can control 100 shares of Netflix for $350.

If you were to purchase 100 shares of Netflix at current prices it would cost about $56,000. With the stock purchase you are risking $56,000 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

*Trading incurs risk and some people lose money trading.

 

MOMENTUM BOOSTS MRK’S HEALTHY SURGE

Posted by Chuck Hughes | Jan 30, 2024 | Chuck's Trade of the Day | 0

 

I just spotted a signal from one of my most reliable indicators. Let me take you through how I spotted it and what it could potentially turn into.

Finding a stock with strong upside momentum can create a winning trade environment. When you know conditions are right for trading, you can set up a trade that fits your personal risk and profit profile. While trading always includes a risk of loss, our goal is to look for trades that help to manage as much of that risk as possible.

This is why I like the Moving Average Convergence/ Divergence (MACD) indicator and especially when it highlights a pattern like we are seeing in for Merck & Co., Inc. (MRK) is a healthcare stock that you can see on the chart below.

As long as the 24/52 Day MACD line remains above the 18-Day EMA, the stock is more likely to keep trading at new highs in the coming days and weeks.

Amplify Potential Returns!

Since MRK’s bullish run is likely to continue, let’s use the Hughes Optioneering calculator to look at the potential returns for a MRK call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat MRK price to a 12.5% increase.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if MRK stock increases 5.0% at option expiration to 127.34 (circled), the call option would make 55.8% before commission. 

If MRK stock increases 10.0% at option expiration to 133.41 (circled), the call option would make 117.3% before commission and outperform the stock return nearly 12 to 1*. 

The prices and returns represented below were calculated based on the current stock and option pricing for MRK on 1/29/2024 before commissions.

*Trading incurs risk and some people lose money trading.

 

Optioneering Video from December 10, 2023 DKNG

 

 

COSTCO’S BULLISH RUN: TIME TO BUY?

Posted by  | Jan 23, 2024 | 

 

We all want our picks to move in our favor and I think that COST is a ticker that has a high likelihood of doing just that. Any time we see a stock with freight train momentum it catches our attention, and we immediately look at what it has the power to do for us.

A great way to identify price momentum with that velocity is to look for stocks that have gone above their 52 week high. By coupling that insight with the leverage of options, it can provide big potential wins. Take a look at the chart and then we’ll show you how are able to profit without the stock moving at all.

 

Any time a stock is pushing in an upward direction, especially above its 52 week high on multiple recent occasions, that momentum will typically continue. Our initial price target for COST stock is 715.00 per share and we are taking a look at what a call option spread could do if COST keep climbing, goes down in price, or doesn’t move at all.

For this option spread, the calculator analysis below reveals the cost of the spread is $285 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if COST stock is up at all, flat, or down -7.5% at expiration the spread will realize a 75.4% return (circled). 

 

*Trading incurs risk and some people lose money trading.

 

Optioneering Video from December 3, 2023 FTAI 

 

 

RSG QUIETLY MAKES NEW HIGHS

Posted by Chuck Hughes | Jan 18, 2024 | Chuck's Trade of the Day |

 

Did you spot this potential trade? If I hadn’t dialed in my options tools, I may have missed it as well. You may recognize the company we are looking at today—Republic Services, Inc. (stock symbol: RSG.) but even if you don’t, what you really need is the chart.

When I was a pilot, I couldn’t fly by just looking out the window. I had to use my gauges and instruments. Stock charts are similar to those gauges and make it possible to be more accurate in spotting great set ups.

On this chart we are going to look at the 10-Month Simple Moving Average.

As the chart shows, in March, the RSG 1-Month Price, crossed above the 10-Month simple moving average (SMA) shown as the blue line above. 

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased. Our initial price target for RSG is 175.00 per share.

The good news is RSG is still above the 10-Month SMA so it has solid momentum to the upside and conditions are ripe for a bullish trade. But with just a couple more simple steps we can increase the profit potential for this trade by harnessing the power of call options.

How to Juice Up the Horsepower in This Trade Example

Now, since RSG’s 1-Month Price is currently trading above the 10-Month SMA and the stock will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for an RSG call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat RSG price to a 12.5% increase.


The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following RSG option example, we used the 1% Rule to select the RSG option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for RSG on 1/17/2024 before commissions.

119.9% Profit Potential for RSG Option

Look at the bottom line on the calculator.

For this specific call option, the calculator analysis below reveals if RSG stock increases 5.0% at option expiration to 174.51 (circled), the call option would make 54.2% before commission. 

If RSG stock increases 10.0% at option expiration to 182.82 (circled), the call option would make 119.9% before commission and outperform the stock return nearly 12 to 1*. 

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this call option, the calculator analysis above reveals the cost of the call option is $1,265 (circled). The maximum risk for a call option purchase is the cost of the trade.

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify winning trades just like this one.

*Trading incurs risk and some people lose money trading.

 

Optioneering Video from Nocember 26, 2023 AMD

 

 

ROSS STORES IN THE ‘BUY ZONE’

 

On Jan 10th, we looked at a Monthly Price Chart of Progressive Corp., noting that PGR’s 1-Month Price is trading above the 10-Month SMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for Ross Stores, Inc. stock symbol: ROST.

Before breaking down ROST’s daily Keltner Channel chart let’s first review which products and services are offered by the company.

Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS brand names in the United States. Its stores primarily offer apparel, accessories, footwear, and home fashions.

Now, let’s begin to break down the Keltner Channel chart for ROST. Below is a Daily Price Chart and the three Keltner Channels for ROST stock.

 

 

Buy ROST Stock

The Hughes Optioneering Team uses the Keltner Channels as an indicator to determine whether a stock is overbought or oversold. If a stock’s daily stock price is trading above the upper Keltner Channel, this signals that the stock is temporarily overbought and subject to a retracement.

Even stocks that are in the strongest bull trends do not advance in a straight line. There are always price retracements along the way. When a stock becomes overbought, its price will typically decline soon after as the inevitable profit taking occurs.

The ROST daily price chart shows that the stock is in a strong price uptrend and has become overbought several times. You can see this as ROST has traded above the Upper Keltner Channel on multiple occasions recently.

But, in every scenario when ROST became overbought, the stock soon experienced a pullback.

Finding opportunities when a stock experiences a pullback is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point.

The Keltner Channel “Buy Zone” occurs when a stock is trading below the upper Keltner Channel. Once the daily price is trading below the upper channel, it provides a lower risk buying opportunity as the stock is likely to rally.

Our initial price target for ROST stock is 142.00 per share.

110.8% Profit Potential for ROST Option

Now, since ROST stock is trading in the Keltner Channel ‘Buy Zone’ this offers a prime trade entry opportunity. Let’s use the Hughes Optioneering calculator to look at the potential returns for a ROST call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat ROST price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following ROST option example, we used the 1% Rule to select the ROST option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a ROST in-the-money option strike price, ROST stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if ROST stock is flat at 135.96 at option expiration, it will only result in a 5.9% loss for the ROST option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for ROST on 1/10/2024 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if ROST stock increases 5.0% at option expiration to 142.76 (circled), the call option would make 52.4% before commission. 

If ROST stock increases 10.0% at option expiration to 149.56 (circled), the call option would make 110.8% before commission and outperform the stock return more than 11 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

 

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

 

 

BK STOCK SURGES ON BUYING INFLOWS

Posted by Chuck Hughes | Jan 9, 2024 | Chuck's Trade of the Day |

 

On Jan 8th, we looked at a Daily Price Chart of Amgen, Inc., noting that AMGN stock is currently making a series of new 52-Week Highs.

For today’s Trade of the Day we will be looking at an On Balance Volume chart for Bank of New York Mellon Corp. stock symbol: BK.

Before breaking down BK’s OBV chart let’s first review which products and services are offered by the company.

The Bank of New York Mellon Corporation is a financial services company that has been in business since 1784. The company’s global client base consists of financial institutions, corporations, government agencies, endowments and foundations as well as high-net-worth individuals. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments.

Confirming a Price Uptrend with OBV

The BK daily price chart below shows that BK is in a price uptrend as the current price is above the price BK traded at six months ago (circled). The On Balance Volume chart is below the daily chart.

On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line.

On Balance Volume Indicator

● When Close is Up, Volume is Added

● When Close is Down, Volume is Subtracted

● A Cumulative Total of Additions and Subtractions form the OBV Line

Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. 

We can see from the OBV chart below that the On Balance Volume line for BK is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability.

The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price uptrend.

 

 

Confirmed ‘Buy’ Signal for BK

Since BK’s OBV line is sloping up, the most likely future price movement for BK is up, making BK a good candidate for a stock purchase or a call option purchase.

Let’s use the Hughes Optioneering calculator to look at the potential returns for a BK call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat BK price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following BK option example, we used the 1% Rule to select the BK option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a BK in-the-money option strike price, BK stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if BK stock is flat at 52.85 at option expiration, it will only result in a 5.3% loss for the BK option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for BK on 1/9/2024 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if BK stock increases 5.0% at option expiration to 55.49 (circled), the call option would make 41.8% before commission. 

If BK stock increases 10.0% at option expiration to 58.14 (circled), the call option would make 88.2% before commission and outperform the stock return nearly 9 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

 

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

 

NEW HIGHS: AMGN BREAKS OUT

Posted by Chuck Hughes | Jan 8, 2024 | Chuck's Trade of the Day

 

On ​Jan 7th, we looked at a Daily Price Chart of Goldman Sachs Group, Inc., noting that GS’s 24/52 Day MACD is trading above the 18-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at a Daily Price chart for Amgen, Inc. stock symbol: AMGN.

Before breaking down AMGN’s daily price chart let’s first review which products and services are offered by the company.

Amgen Inc. discovers, develops, manufactures, and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience areas. The company’s products include Enbrel to treat plaque psoriasis, rheumatoid arthritis, and psoriatic arthritis; Neulasta that reduces the chance of infection due a low white blood cell count in patients cancer; among others.

Now, let’s begin to break down the Daily Price chart for AMGN. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

 

 

Buy AMGN Stock

The Daily Price chart above shows that AMGN stock has been hitting new 52-Week Highs regularly since early January.

Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.

The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.

You see, after a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased.

Our initial price target for AMGN stock is 315.00 per share.

Profit if AMGN is Up, Down or Flat

Now, since AMGN is making a series of new 52-Week Highs and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for an AMGN call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in AMGN stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for AMGN on 1/8/2024 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $663 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if AMGN stock is flat or up at all at expiration the spread will realize a 50.8% return (circled). 

And if AMGN stock decreases 7.5% at option expiration, the option spread would make a 50.8% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 50.8% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader. 

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

 

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

Optioneering Video from November 19, 2023 VRT

 

JUMP IN BUYING PRESSURE DRIVES TMUS HIGHER

Posted by Chuck Hughes | Jan 4, 2024 | Chuck's Trade of the Day

 

On Jan 3rd, we looked at a Daily Price Chart of Vertex Pharmaceuticals Inc., noting that VRTX shares have been making a series of new 52-Week Highs recently.

For today’s Trade of the Day we will be looking at an On Balance Volume chart for T-Mobile US, Inc. stock symbol: TMUS.

Before breaking down TMUS’s OBV chart let’s first review which products and services are offered by the company.

T-Mobile US, Inc., together with its subsidiaries, provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands. The company offers voice, messaging, and data services to customers in the postpaid, prepaid, and wholesale and other services. It also provides wireless devices, including smartphones, wearables, tablets, home broadband routers, and other mobile communication devices, as well as wireless devices and accessories.

Confirming a Price Uptrend with OBV

The TMUS daily price chart below shows that TMUS is in a price uptrend as the current price is above the price TMUS traded at five months ago (circled). The On Balance Volume chart is below the daily chart.

On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line.

On Balance Volume Indicator

● When Close is Up, Volume is Added

● When Close is Down, Volume is Subtracted

● A Cumulative Total of Additions and Subtractions form the OBV Line

Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. 

We can see from the OBV chart below that the On Balance Volume line for TMUS is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability.

The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price uptrend.

Confirmed ‘Buy’ Signal for TMUS

Since TMUS’s OBV line is sloping up, the most likely future price movement for TMUS is up, making TMUS a good candidate for a stock purchase or a call option purchase.

Let’s use the Hughes Optioneering calculator to look at the potential returns for a TMUS call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat TMUS price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following TMUS option example, we used the 1% Rule to select the TMUS option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a TMUS in-the-money option strike price, TMUS stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if TMUS stock is flat at 162.08 at option expiration, it will only result in a 4.5% loss for the TMUS option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for TMUS on 1/3/2024 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if TMUS stock increases 5.0% at option expiration to 170.18 (circled), the call option would make 50.4% before commission. 

If TMUS stock increases 10.0% at option expiration to 178.29 (circled), the call option would make 105.3% before commission and outperform the stock return more than 10 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

VRTX: BIOTECH CO. MAKING NEW HIGHS

 

On January 2rd, we looked at a Monthly Price Chart of Waste Management, Inc., noting that WM’s 1-Month Price is trading above the 10-Month SMA signaling a ‘Buy’

For today’s Trade of the Day we will be looking at a Daily Price chart for Vertex Pharmaceuticals Inc. stock symbol: VRTX.

Before breaking down VRTX’s daily price chart let’s first review which products and services are offered by the company.

Vertex Pharmaceuticals Incorporated is focused on the discovery, development, and commercialization of small molecule drugs targeting serious diseases. The company’s main area of focus is cystic fibrosis. The company’s lead marketed products are Trikafta, Symdeko/Symkevi, Orkambi and Kalydeco, which are collectively approved to treat the people with CF in North America, Europe and Australia. 

Now, let’s begin to break down the Daily Price chart for VRTX. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

Buy VRTX Stock

The Daily Price chart above shows that VRTX stock has been hitting new 52-Week Highs regularly since mid-December.

Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.

The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.

You see, after a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased.

Our initial price target for VRTX stock is 418.00 per share.

Profit if VRTX is Up, Down or Flat

Now, since VRTX is currently making a series of new 52-Week Highs and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a VRTX call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in VRTX stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for VRTX on 1/3/2024 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $600 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if VRTX stock is flat or up at all at expiration the spread will realize a 66.7% return (circled). 

And if VRTX stock decreases 7.5% at option expiration, the option spread would make a 48.3% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 66.7% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader. 

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

QCOM FLASHES TECHNICAL BUY SIGNAL

Posted by Chuck Hughes | Dec 28, 2023 | Chuck's Trade of the Day

 

​On December 28th, we looked at a Monthly Price Chart of Apple, Inc., noting that AAPL’s 1-Month Price is trading above the 10-Month SMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at an On Balance Volume chart for QUALCOMM Incorporated stock symbol: QCOM.

Before breaking down QCOM’s OBV chart let’s first review which products and services are offered by the company.

QUALCOMM Incorporated engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).

Confirming a Price Uptrend with OBV

The QCOM daily price chart below shows that QCOM is in a price uptrend as the current price is above the price QCOM traded at six months ago (circled). The On Balance Volume chart is below the daily chart.

On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line.

On Balance Volume Indicator

● When Close is Up, Volume is Added

● When Close is Down, Volume is Subtracted

● A Cumulative Total of Additions and Subtractions form the OBV Line

Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. 

We can see from the OBV chart below that the On Balance Volume line for QCOM is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability.

The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price uptrend.

Confirmed ‘Buy’ Signal for QCOM

Since QCOM’s OBV line is sloping up, the most likely future price movement for QCOM is up, making QCOM a good candidate for a stock purchase or a call option spread.

Let’s use the Hughes Optioneering calculator to look at the potential returns for a QCOM debit spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in QCOM stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for QCOM on 12/28/2023 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $330 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if QCOM stock is flat or up at all at expiration the spread will realize a 51.5% return (circled). 

And if QCOM stock decreases 7.5% at option expiration, the option spread would make a 49.7% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 51.5% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader. 

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

 

QCOM FLASHES TECHNICAL BUY SIGNAL

Posted by Chuck Hughes | Dec 28, 2023 | Chuck's Trade of the Day |

 

On December 28, we looked at a Monthly Price Chart of Apple, Inc., noting that AAPL’s 1-Month Price is trading above the 10-Month SMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at an On Balance Volume chart for QUALCOMM Incorporated stock symbol: QCOM.

Before breaking down QCOM’s OBV chart let’s first review which products and services are offered by the company.

QUALCOMM Incorporated engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).

Confirming a Price Uptrend with OBV

The QCOM daily price chart below shows that QCOM is in a price uptrend as the current price is above the price QCOM traded at six months ago (circled). The On Balance Volume chart is below the daily chart.

On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line.

On Balance Volume Indicator

● When Close is Up, Volume is Added

● When Close is Down, Volume is Subtracted

● A Cumulative Total of Additions and Subtractions form the OBV Line

Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. 

We can see from the OBV chart below that the On Balance Volume line for QCOM is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability.

The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price uptrend.

Confirmed ‘Buy’ Signal for QCOM

Since QCOM’s OBV line is sloping up, the most likely future price movement for QCOM is up, making QCOM a good candidate for a stock purchase or a call option spread.

Let’s use the Hughes Optioneering calculator to look at the potential returns for a QCOM debit spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in QCOM stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for QCOM on 12/28/2023 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $330 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if QCOM stock is flat or up at all at expiration the spread will realize a 51.5% return (circled). 

And if QCOM stock decreases 7.5% at option expiration, the option spread would make a 49.7% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 51.5% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader. 

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

LULU SHARES SPRINGING HIGHER

Posted by Chuck Hughes | Dec 26, 2023 | Chuck's Trade of the Day

 

On Friday, we looked at a Daily Price Chart of Take-Two Interactive Software, Inc., noting that TTWO’s 50-Day EMA is trading above the 100-Day EMA.

For today’s Trade of the Day we will be looking at a Daily Price chart for Lululemon Athletica Inc. stock symbol: LULU.

Before breaking down LULU’s daily price chart let’s first review which products and services are offered by the company.

Lululemon Athletica Inc., together with its subsidiaries, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. It operates in two segments, Company-Operated Stores and Direct to Consumer. The company offers pants, shorts, tops, and jackets for healthy lifestyle, such as yoga, running, training, and other activities. 

Now, let’s begin to break down the Daily Price chart for LULU. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

 

Buy LULU Stock

The Daily Price chart above shows that LULU stock has been hitting new 52-Week Highs regularly over the past few weeks.

Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.

The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.

You see, after a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased.

Our initial price target for LULU stock is 515.00 per share.

Profit if LULU is Up, Down or Flat

Now, since LULU is currently making a series of new 52-Week Highs and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a LULU call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in LULU stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for LULU on 12/26/2023 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $657 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if LULU stock is flat or up at all at expiration the spread will realize a 52.2% return (circled). 

And if LULU stock decreases 7.5% at option expiration, the option spread would make a 33.8% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 52.2% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader. 

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

FINANCIAL ETF JUMPS TO NEW HIGHS

Posted by Chuck Hughes | Dec 20, 2023 | Chuck's Trade of the Day

On December 20th, we looked at a Daily Price Chart of Cameco Corp., noting that CCJ’s OBV line is sloping up, validating the stock’s recent bullish trend.

For today’s Trade of the Day we will be looking at a Daily Price chart for the Financial Select Sector SPDR ETF, symbol: XLF.

Before breaking down XLF’s daily price chart let’s first review the investment objective of the ETF.

The XLF ETF seeks to invest substantially all, but at least 95%, of its total assets in the securities comprising the index. The index includes companies that have been identified as Financial companies by the Global Industry Classification Standard, including securities of companies from the following industries: financial services; insurance; banks; capital markets; mortgage real estate investment trusts; and consumer finance.

Now, let’s begin to break down the Daily Price chart for XLF. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

 

Buy the XLF ETF

The Daily Price chart above shows that the XLF ETF has been hitting new 52-Week Highs regularly this week.

Simply put, an ETF does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.

The Hughes Optioneering team looks for ETFs that are making a series of 52-Week Highs as this is a good indicator that the ETF is in a powerful uptrend.

You see, after an ETF makes a series of two or more 52-Week Highs, the ETF typically continues its price uptrend and should be purchased.

Our initial price target for the XLF ETF is 39.50 per share.

131.8% Profit Potential for XLF Option

Now, since the XLF ETF is currently making a series of new 52-Week Highs this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an XLF call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat XLF price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following XLF option example, we used the 1% Rule to select the XLF option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select an XLF in-the-money option strike price, XLF only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying ETF closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if the XLF ETF is flat at 37.57 at option expiration, it will only result in a 5.9% loss for the XLF option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to ETFS.

The prices and returns represented below were calculated based on the current ETF and option pricing for XLF on 12/19/2023 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying ETF continues to move up in price.

For this specific call option, the calculator analysis below reveals if the XLF ETF increases 5.0% at option expiration to 39.45 (circled), the call option would make 62.9% before commission. 

If the XLF ETF increases 10.0% at option expiration to 41.33 (circled), the call option would make 131.8% before commission and outperform the ETF return more than 13 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish ETFs.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

TECHNICAL ‘BUY’ FOR JPM SIGNALS STRENGTH

Posted by Chuck Hughes | Dec 18, 2023 | Chuck's Trade of the Day

 

On Friday, we looked at a Daily Price Chart of Salesforce.com, Inc., noting that CRM stock has been making a series of new 52-Week Highs recently.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for J.P. Morgan Chase & Co. stock symbol: JPM.

Before breaking down JPM’s monthly chart let’s first review what products and services the company offers.

JPMorgan Chase & Co. operates as a financial services company worldwide. It operates through four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM).

Now, let’s begin to break down the monthly chart for JPM stock.

Below is a 10-Month Simple Moving Average chart for J.P Morgan Chase & Co.

Buy JPM Stock

As the chart shows, in November, the JPM 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for JPM stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend.

Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play! 

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for JPM is 172.00 per share.

143.6% Profit Potential for JPM Option

Now, since JPM’s 1-Month Price is trading above the 10-Month SMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a JPM call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat JPM price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following JPM option example, we used the 1% Rule to select the JPM option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a JPM in-the-money option strike price, JPM stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if JPM stock is flat at 165.71 at option expiration, it will only result in a 4.4% loss for the JPM option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for JPM on 12/18/2023 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if JPM stock increases 5.0% at option expiration to 174.00 (circled), the call option would make 69.6% before commission. 

If JPM stock increases 10.0% at option expiration to 182.28 (circled), the call option would make 143.6% before commission and outperform the stock return more than 14 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

 *Trading incurs risk and some people lose money trading.

 

OPTIONEERING VIDEO FROM NOVEMBER ​12, 2023 APP

 

SURGE OF BUYING DRIVES MA UPWARD

Posted by Chuck Hughes | Dec 13, 2023 | Chuck's Trade of the Day |

On December 12th, we looked at a Monthly Price Chart of Toll Brothers, Inc., noting that TOL’s 1-Month Price is trading above the 10-Month SMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at an On Balance Volume chart for Mastercard Inc. stock symbol: MA.

Before breaking down MA’s OBV chart let’s first review which products and services are offered by the company.

Mastercard Incorporated, a technology company, provides transaction processing and other payment-related products and services in the United States and internationally. It facilitates the processing of payment transactions, including authorization, clearing, and settlement, as well as delivers other payment-related products and services.

Confirming a Price Uptrend with OBV

The MA daily price chart below shows that MA is in a price uptrend as the current price is above the price MA traded at six months ago (circled). The On Balance Volume chart is below the daily chart.

On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line.

On Balance Volume Indicator

● When Close is Up, Volume is Added

● When Close is Down, Volume is Subtracted

● A Cumulative Total of Additions and Subtractions form the OBV Line

Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. 

We can see from the OBV chart below that the On Balance Volume line for MA is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability.

The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price uptrend.

 

 

Confirmed ‘Buy’ Signal for MA

Since MA’s OBV line is sloping up, the most likely future price movement for MA is up, making MA a good candidate for a stock purchase or a call option spread.

Let’s use the Hughes Optioneering calculator to look at the potential returns for a MA debit spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in MA stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for MA on 12/13/2023 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $312 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if MA stock is flat or up at all at expiration the spread will realize a 60.3% return (circled). 

And if MA stock decreases 7.5% at option expiration, the option spread would make a 60.3% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 60.3% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader. 

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

 

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

ARES: TECHNICAL BUY SIGNAL SPOTTED

Posted by Chuck Hughes | Dec 11, 2023 | Chuck's Trade of the Day

​On December 11th,, we looked at a Monthly Price Chart for Uber Technologies, Inc., noting that UBER’s 1-Month Price is trading above the 10-Month SMA signaling a ‘Buy’.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for Ares Management Corporation stock symbol: ARES.

Before breaking down ARES’s daily chart let’s first review what products and services the company offers.

Ares Management Corporation operates as an alternative asset manager in the United States, Europe, and Asia. The company’s Tradable Credit Group segment manages various types of investment funds, such as commingled and separately managed accounts for institutional investors, and publicly traded vehicles and sub-advised funds for retail investors in the tradable and non-investment grade corporate credit markets.

Now, let’s begin to break down the Daily Price chart for ARES stock.

Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for ARES.

50-Day EMA and 100-Day EMA ‘Buy’ Signal

The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving.

  • 50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal
  • 50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal

When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the stock’s buying pressure has begun to outweigh the selling pressure signaling a ‘buy’ signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a ‘sell’ signal.

Buy ARES Stock

As the chart shows, on January 9th, the ARES 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for ARES stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend.

Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.

As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for ARES stock is 120.00 per share.

90.3% Profit Potential for ARES Option

Now, since ARES’s 50-Day EMA is trading above the 100-Day EMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an ARES call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat ARES price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following ARES option example, we used the 1% Rule to select the ARES option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a ARES in-the-money option strike price, ARES stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if ARES stock is flat at 110.72 at option expiration, it will only result in a 6.4% loss for the ARES option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for ARES on 12/11/2023 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if ARES stock increases 5.0% at option expiration to 116.26 (circled), the call option would make 42.0% before commission. 

If ARES stock increases 10.0% at option expiration to 121.79 (circled), the call option would make 90.3% before commission and outperform the stock return more than 9 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

Optioneering Video from November 5, 2023 STNG

 

 

GD: TECHNICAL ‘BUY’ TREND IDENTIFIED

Posted by Chuck Hughes | Dec 7, 2023 | Chuck's Trade of the Day

​On December 6th, we looked at a Daily Price Chart for W.R. Berkley Corp., noting that WRB’s 24/52 Day MACD is trading above the 18-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for General Dynamics Corp. stock symbol: GD.

Before breaking down GD’s daily chart let’s first review what products and services the company offers.

General Dynamics Corporation operates as an aerospace and defense company worldwide. It operates through four segments: Aerospace, Marine Systems, Combat Systems, and Technologies. The Aerospace segment produces and sells business jets; and offers aircraft maintenance and repair, management, aircraft-on-ground support and completion, charter, staffing, and fixed-base operator services. 

Now, let’s begin to break down the Daily Price chart for GD stock.

Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for GD.

 

 

50-Day EMA and 100-Day EMA ‘Buy’ Signal

The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving.

  • 50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal
  • 50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal

When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the stock’s buying pressure has begun to outweigh the selling pressure signaling a ‘buy’ signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a ‘sell’ signal.

Buy GD Stock

As the chart shows, on August 14th, the GD 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for GD stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend.

Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.

As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for GD stock is 262.00 per share.

115.5% Profit Potential for GD Option

Now, since GD’s 50-Day EMA is trading above the 100-Day EMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a GD call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat GD price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following GD option example, we used the 1% Rule to select the GD option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a GD in-the-money option strike price, GD stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if GD stock is flat at 252.22 at option expiration, it will only result in a 5.4% loss for the GD option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for GD on 12/7/2023 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if GD stock increases 5.0% at option expiration to 264.83 (circled), the call option would make 55.1% before commission. 

If GD stock increases 10.0% at option expiration to 277.44 (circled), the call option would make 115.5% before commission and outperform the stock return more than 11 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

 

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

RSG: STOCK BOUNDS TO FRESH HIGHS

Posted by Chuck Hughes | Dec 5, 2023 | Chuck's Trade of the Day   

On December 4th, we looked at a Daily Price Chart of F5 Networks, Inc., noting that FFIV’s OBV line is sloping up, validating the recent bullish trend.

For today’s Trade of the Day we will be looking at a Daily Price chart for Republic Services, Inc. stock symbol: RSG.

Before breaking down RSG’s daily price chart let’s first review which products and services are offered by the company.

Republic Services, Inc., together with its subsidiaries, offers environmental services in the United States. It is involved in the collection and processing of recyclable, solid waste, and industrial waste materials; transportation and disposal of non-hazardous and hazardous waste streams; and other environmental solutions. Its residential collection services include curbside collection of material for transport to transfer stations, landfills, recycling centers, and organics processing facilities; supply of recycling and waste containers; and renting of compactors. 

Now, let’s begin to break down the Daily Price chart for RSG. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

 

Buy RSG Stock

The Daily Price chart above shows that RSG stock has been hitting new 52-Week Highs regularly since early November.

Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.

The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.

You see, after a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased.

Our initial price target for RSG stock is 170.00 per share.

89.4% Profit Potential for RSG Option

Now, since RSG stock is currently making a series of new 52-Week Highs this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an RSG call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat RSG price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following RSG option example, we used the 1% Rule to select the RSG option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select an RSG in-the-money option strike price, RSG stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if RSG stock is flat at 162.56 at option expiration, it will only result in a 1.6% loss for the RSG option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for RSG on 12/4/2023 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if RSG stock increases 5.0% at option expiration to 170.69 (circled), the call option would make 43.9% before commission. 

If RSG stock increases 10.0% at option expiration to 178.82 (circled), the call option would make 89.4% before commission and outperform the stock return nearly 9 to 1*. 

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

 

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

*Trading incurs risk and some people lose money trading.

 

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