Chuck's T​ip's of the ​Day and Video Blog

**Interested in getting Chuck's hand-picked trades as they happen?, call today 866-661-5664 or request a call. 

Request Call

 

 

Request Call

 

October 22nd, 2021

October 22nd, 2021

Charles Schwab Making New Highs

Yesterday, we looked at a Monthly Price Chart for Dell Technologies, Inc., noting that the stock’s 1-Month Price is trading above the 10-Month SMA.

For today’s Trade of the Day we will be looking at a Daily Price chart for Charles Schwab Corp. stock symbol: SCHW.

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

The Charles Schwab Corporation, through its subsidiaries, provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The company operates in two segments, Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services, and other corporate brokerage services; equity compensation plan sponsors full-service recordkeeping for stock plans, stock options, restricted stock, performance shares, and stock appreciation rights; and retail investor, retirement plan, and mutual fund clearing services. 

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

Buy SCHW Stock

The Daily Price chart above shows that SCHW stock began reaching a series of higher highs and higher lows since late September.

This pattern of bullish trading suggests the stock will march on to a further advance.

You see, after a stock makes a series of two or more higher highs and higher lows, the stock typically continues its price up trend and should be purchased.

Our initial price target for SCHW stock is 87.00 per share.

121.5% Profit Potential for SCHW Option

Now, since SCHW stock is currently making a series of higher highs and higher lows 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 SCHW 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 SCHW 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 SCHW option example, we used the 1% Rule to select the SCHW 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 SCHW in-the-money option strike price, SCHW 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 SCHW stock is flat at 82.24 at option expiration, it will only result in a 4.4% loss for the SCHW 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 SCHW on 10/21/2021 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 SCHW stock increases 5.0% at option expiration to 86.35 (circled), the call option would make 58.5% before commission.

If SCHW stock increases 10.0% at option expiration to 90.46 (circled), the call option would make 121.5% before commission and outperform the stock return more than 12 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 winning trades 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.

 

 

October 21st, 2021

October 21st, 2021

Tech Giant Dell Signals 'Buy'

Yesterday, we looked at a Daily Price Chart of Home Depot, Inc., noting that the stock has been making a series of 52-Week Highs since mid-October.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Dell Technologies, Inc. stock symbol: DELL.

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

Dell Technologies Inc. designs, develops, manufactures, markets, sells, and supports Information technology solutions, products, and services worldwide. It operates through three segments: Infrastructure Solutions Group (ISG), Client Solutions Group (CSG), and VMware. The ISG segment provides traditional and next-generation storage solutions; and rack, blade, tower, and hyperscale servers.  

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

Below is a 10-Month Simple Moving Average chart for Dell Technologies, Inc.

Buy DELL Stock

As the chart shows, in May 2020, the DELL 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for DELL 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 DELL is 124.00 per share.

88.2% Profit Potential for DELL Option

Now, since DELL’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 DELL 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 DELL 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 DELL option example, we used the 1% Rule to select the DELL 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 DELL in-the-money option strike price, DELL 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 DELL stock is flat at 111.78 at option expiration, it will only result in a 3.4% loss for the DELL 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 DELL on 10/20/2021 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 DELL stock increases 5.0% at option expiration to 117.37 (circled), the call option would make 42.4% before commission.

If DELL stock increases 10.0% at option expiration to 122.96 (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 winning trades 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.

Request Call

October 20th, 2021

October 20th, 2021

New All-Time Highs for HD Stock

Yesterday, we looked at a Daily Price Chart of Fortinet Inc. noting the stock’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’.

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

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

The Home Depot, Inc. operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, building materials, lawn and garden products, and decor products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself and professional customers. 

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

Buy HD Stock

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

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 HD stock is 375.00 per share.

Profit if HD is Up, Down or Flat

Now, since HD stock is currently making a series of 52-Week Highs and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a HD 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 HD 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 HD on 10/19/2021 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 HD stock is flat or up at all at expiration the spread will realize a 50.8% return (circled).

And if the HD 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 initiated.

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 winning trades 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.

Request Call

 October 19th, 2021

October 19th, 2021

Strong ‘Buy’ Signal for Fortinet

Yesterday, we looked at a Daily Price Chart of Alliance Resource Partners, L.P., noting that the stock’s OBV line is sloping up, validating the stock’s bullish trend.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for Fortinet Inc. stock symbol: FTNT.

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

Fortinet, Inc. provides broad, integrated, and automated cybersecurity solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It offers FortiGate hardware and software licenses that provide various security and networking functions, including firewall, intrusion prevention, anti-malware, virtual private network, application control, web filtering, anti-spam, and wide area network acceleration. 

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

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

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 FTNT Stock

As the chart shows, on December 16th, 2020, the FTNT 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for FTNT 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 FTNT stock is 350.00 per share.

Profit if FTNT is Up, Down or Flat

Now, since FTNT’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 FTNT 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 10.0% increase to a 10.0% decrease in FTNT 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 FTNT on 10/18/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $650 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if FTNT stock is flat or up at all at expiration the spread will realize a 53.8% return (circled).

And if FTNT stock decreases 10.0% at option expiration, the option spread would make a 53.8% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 53.8% profit potential when the trade was initiated.

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 winning trades 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.

October 18th, 2021

October 18th, 2021

Natural Resource Stock Confirms Uptrend

On Friday, we looked at a Daily Chart of CRA International, Inc., noting that the stock’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 an On Balance Volume chart for Alliance Resource Partners, L.P. stock symbol: ARLP.

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

Alliance Resource Partners, L.P., a diversified natural resource company, produces and markets coal primarily to utilities and industrial users in the United States. The company operates through three segments: Illinois Basin, Appalachia, and Minerals

Confirming a Price Uptrend with OBV

The ARLP daily price chart below shows that ARLP is in a price uptrend as the current price is above the price ARLP 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 ARLP 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 up trend.

Confirmed ‘Buy’ Signal for ARLP

Since ARLP's OBV line is sloping up, the most likely future price movement for ARLP is up, making ARLP a good candidate for a stock purchase or a debit spread trade.

Let's use the Hughes Optioneering calculator to look at the potential returns for a ARLP 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 ARLP 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 ARLP on 10/15/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $290 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if ARLP stock is flat or up at all at expiration the spread will realize a 72.4% return (circled).

And if ARLP stock decreases 7.5% at option expiration, the option spread would make a 72.4% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 72.4% profit potential when the trade was initiated.

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 winning trades 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.

  

Request Call

 

October 14th, 2021

October 14th, 2021

Nasdaq ETF Maintains Strong 'Buy' Signal

Yesterday, we looked at a Daily Price Chart for Salesforce.com, Inc. noting that the stock had retraced below the upper Keltner Channel in the ‘Buy Zone’.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for ProShares Ultra QQQ ETF symbol: QLD.

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

The QLD ETF seeks daily investment results, before fees and expenses, that correspond to two times the daily performance of the NASDAQ-100 Index. The index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.

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

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

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 QLD ETF

As the chart shows, on June 11th, 2020, the QLD 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for the QLD ETF exceeded the selling pressure. For this kind of crossover to occur, an ETF 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 QLD stock is 80.00 per share.

Profit if QLD Is Down 10%

Now, since QLD’s 50-Day EMA is trading above the 100-Day EMA and will likely rally from here, let’s use the Optioneering calculator to look at the potential returns for a QLD covered call trade. Covered calls are also known as buy writes.

The Buy Write Calculator will calculate the profit/loss potential for a covered call trade based on the price change of the underlying stock/ETF at option expiration in this example from a 10% increase to a 10% decrease in the QLD ETF at option expiration.

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

The prices and returns represented below were calculated based on the current ETF and option pricing for QLD on 10/13/2021 before commissions.

Built in Profit Potential

For this covered call, the calculator analysis below reveals the cost or the breakeven price is $5,454.00 (circled). The maximum risk for a covered call is the cost of the covered call.

The analysis reveals that if QLD is flat at 73.69 or up at all at expiration the covered call will realize a $1,846.00 profit and a 33.8% return (circled).

If QLD decreases 5.0% at option expiration, the covered call will realize a $1,546.55 profit and a 28.4% return.

And if QLD decreases 10.0% at option expiration, the covered call will realize a $1,178.10 profit and an 21.6% return.

Due to option pricing characteristics, this covered call has a ‘built in’ 33.8% profit potential when the trade was initiated.

Covered call trades can result in a higher percentage of winning trades compared to a directional stock 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 Optioneering Team is here to help you identify winning trades 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.

 

Request Call

 

October 13th, 2021

October 13th, 2021

Salesforce Shares in the 'Buy Zone'

Yesterday, we looked at a Daily Price Chart of Enbridge, Inc. noting the stock has been making a series of 52-Week Highs recently.

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

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

Salesforce.com, inc. develops enterprise cloud computing solutions with a focus on customer relationship management worldwide. The company offers Sales Cloud to store data, monitor leads and progress, forecast opportunities, and gain insights through analytics and relationship intelligence, as well as deliver quotes, contracts, and invoices. It also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as a field service solution that enables companies to connect agents, dispatchers, and mobile employees through a centralized platform.

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

Buy CRM 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, it’s price will typically decline soon after as the inevitable profit taking occurs.

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

But, in every scenario when CRM 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 CRM stock is 300.00 per share.

Profit if CRM is Up, Down or Flat

Now, since CRM’s price has retraced into the ‘Buy Zone’ this offers a prime trade entry opportunity. Let’s use the Hughes Optioneering calculator to look at the potential returns for a CRM 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 CRM 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 CRM on 10/12/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $618 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if CRM stock is flat or up at all at expiration the spread will realize a 61.8% return (circled).

And if CRM stock decreases 7.5% at option expiration, the option spread would make a 51.0% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 61.8% profit potential when the trade was initiated.

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 winning trades 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.

Request Call

 

October 12th, 2021

October 12th, 2021

New Highs for Energy Company

Yesterday, we looked at a Monthly Price Chart of Nutrien Ltd. noting the stock’s 1-Month Price is trading above the 10-Month SMA.

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

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

Enbridge Inc. operates as an energy infrastructure company. The company operates through five segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services. 

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

Buy ENB Stock

The Daily Price chart above shows that ENB stock has been hitting new 52-Week Highs regularly for the past week.

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 ENB stock is 44.25 per share.

99.1% Profit Potential for ENB Option

Now, since ENB stock is currently making a series of 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 ENB 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 ENB 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 ENB option example, we used the 1% Rule to select the ENB 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 ENB in-the-money option strike price, ENB 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 ENB stock is flat at 41.33 at option expiration, it will only result in a 4.3% loss for the ENB 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 ENB on 10/11/2021 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 ENB stock increases 5.0% at option expiration to 43.40 (circled), the call option would make 47.4% before commission.

If ENB stock increases 10.0% at option expiration to 45.46 (circled), the call option would make 99.1% before commission and outperform the stock return nearly 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 winning trades 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.

 

Request Call

 

Request Call

October 11th, 2021

October 11th, 2021

Bullish Breakout for Nutrien Stock

On Friday, we looked at a Daily Price Chart of iShares U.S. Financials ETF noting that the ETF had retraced below the upper Keltner Channel in the ‘Buy Zone’.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Nutrien Ltd. stock symbol: NTR.

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

Nutrien Ltd. provides crop inputs, services, and solutions. The company offers potash, nitrogen, phosphate, and sulfate products; and financial solutions. It also distributes crop nutrients, crop protection products, seeds, and merchandise products through approximately 2,000 retail locations in the United States, Canada, South America, and Australia.

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

Below is a 10-Month Simple Moving Average chart for Nutrien Ltd.

Buy NTR Stock

As the chart shows, in September 2020, the NTR 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for NTR 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 NTR is 77.50 per share.

101.7% Profit Potential for NTR Option

Now, since NTR’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 NTR 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 NTR 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 NTR option example, we used the 1% Rule to select the NTR 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 NTR in-the-money option strike price, NTR 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 NTR stock is flat at 70.19 at option expiration, it will only result in an 5.5% loss for the NTR 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 NTR on 10/8/2021 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 NTR stock increases 5.0% at option expiration to 73.70 (circled), the call option would make 48.1% before commission.

If NTR stock increases 10.0% at option expiration to 77.21 (circled), the call option would make 101.7% 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 winning trades 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.

Request Call

 

October 8th, 2021

October 8th, 2021

‘Buy Zone’ Alert for IYF ETF

Yesterday, we looked at a Daily Price Chart of Calix Networks Inc. noting the stock’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for the iShares U.S. Financials ETF, symbol: IYF.

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

The IYF ETF seeks to track the investment results of the Dow Jones U.S. Financials Capped Index composed of U.S. equities in the financial sector. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The underlying index measures the performance of U.S. companies in the financial sector.

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

 

Buy the IYF ETF

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

Even ETFs that are in the strongest bull trends do not advance in a straight line. There are always price retracements along the way. When an ETF becomes overbought, it’s price will typically decline soon after as the inevitable profit taking occurs.

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

But, in every scenario when IYF became overbought, the ETF soon experienced a pullback.

Finding opportunities when an ETF 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 an ETF 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 ETF is likely to rally.

Our initial price target for IYF is 89.60 per share.

99.7% Profit Potential for IYF Option

Now, since the IYF ETF is currently in the Keltner Channel ‘Buy Zone’ and the ETF’s bullish rally will likely continue, let’s use the Hughes Optioneering calculator to look at the potential returns for an IYF 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 IYF 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 IYF option example, we used the 1% Rule to select the IYF 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 IYF in-the-money option strike price, IYF 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 IYF is flat at 85.34 at option expiration, it will only result in a 7.7% loss for the IYF 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 IYF on 10/7/2021 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 IYF increases 5.0% at option expiration to 89.61 (circled), the call option would make 46.0% before commission.

If IYF increases 10.0% at option expiration to 93.87 (circled), the call option would make 99.7% before commission and outperform the ETF return nearly 10 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 winning trades 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.

Average Portfolio Return of 700.1%

Below is a screenshot of the current open trade profit results from Chuck’s Weekly Option Alert Trading Service. There are currently $589,905.36 in open trade profits with an average portfolio return of 700.1% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios.

Request Call

October 7th, 2021

October 7th, 2021

CALX on Long-Term ‘Buy’ Signal

Yesterday, we looked at a Daily Price Chart for Netflix, Inc. noting that the stock’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 Calix Networks Inc. stock symbol: CALX.

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

Calix, Inc., together with its subsidiaries, provides cloud and software platforms, and systems and services in the United States, the Middle East, Canada, Europe, the Caribbean, and internationally. The company's cloud and software platforms, and systems and services enable communication service providers (CSPs) to provide a range of services. It provides Calix Cloud platform, a role-based analytics platform. 

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

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

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 CALX Stock

As the chart shows, on April 27th, 2020, the CALX 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for CALX 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 CALX stock is 59.50 per share.

Profit if CALX Is Down 10%

Now, since CALX’s 50-Day EMA is trading above the 100-Day EMA and will likely rally from here, let’s use the Optioneering calculator to look at the potential returns for a CALX covered call trade. Covered calls are also known as buy writes.

The Buy Write Calculator will calculate the profit/loss potential for a covered call trade based on the price change of the underlying stock/ETF at option expiration in this example from a 10% increase to a 10% decrease in CALX stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for covered calls and the ability of covered calls 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 price used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for CALX on 10/6/2021 before commissions.

Built in Profit Potential

For this covered call, the calculator analysis below reveals the cost or the breakeven price is $4,195.00 (circled). The maximum risk for a covered call is the cost of the covered call.

The analysis reveals that if CALX is flat at 55.35 or up at all at expiration the covered call will realize a $1,305.00 profit and a 31.1% return (circled).

If CALX decreases 5.0% at option expiration, the covered call will realize a $1,063.25 profit and a 25.3% return.

And if CALX decreases 10.0% at option expiration, the covered call will realize a $786.50 profit and an 18.7% return.

Due to option pricing characteristics, this covered call has a ‘built in’ 31.1% profit potential when the trade was initiated.

Covered call trades can result in a higher percentage of winning trades compared to a directional stock 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 Optioneering Team is here to help you identify winning trades 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.

Request Call

 

October 6th, 2021

October 6th, 2021

Momentum Pushes Netflix Upward

Yesterday, we looked at a Monthly Price Chart of CBRE Group, Inc. noting that the stock’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 Moving Average Convergence/ Divergence (MACD) chart for Netflix, Inc. stock symbol: NFLX.

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

Netflix, Inc. provides entertainment services. It offers TV series, documentaries, and feature films across various genres and languages. The company provides members the ability to receive streaming content through a host of Internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices. It also provides DVDs-by-mail membership services. The company has approximately 204 million paid members in 190 countries.   

MACD Indicator confirms Price Momentum

The NFLX daily price chart below shows that NFLX 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.

MACD uses moving averages to create a momentum indicator by subtracting the longer-term moving average from the shorter-term moving average. The MACD is calculated by subtracting a stock’s longer term 52-Day Exponential Moving Average (EMA) from its shorter term 24-Day EMA. This creates the MACD line.

MACD ‘Buy’ Signal

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. When the 24/52 Day MACD lines crosses below the 18-Day EMA it indicates negative momentum and lower prices for the stock. MACD is more of a leading indicator than a moving average cross over which tends to lag price movement.

MACD Histogram shows Acceleration of Momentum

Also included in a MACD chart is the histogram bar graph. This portion of the chart helps to illustrate the distance between the 24/52 Day MACD and the 18-Day EMA.

When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink this indicates a narrowing of the gap between the 24/52 Day MACD and the 18-Day EMA and a slowing of the stock’s momentum. When the gap between the two indicators begins to narrow, this typically indicates a crossover of the indicator lines could happen soon.

Buy NFLX 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 NFLX’s bullish run is likely to continue, the stock should be purchased.

Our initial price target for NFLX stock is 670.00 per share.

Profit if NFLX is Up, Down or Flat

Now, since NFLX’s 24/52 Day MACD is trading above the 18-Day EMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a NFLX 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 NFLX 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 NFLX on 10/5/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $588 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if NFLX stock is flat or up at all at expiration the spread will realize a 70.1% return (circled).

And if the NFLX decreases 7.5% at option expiration, the option spread would make a 70.1% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 70.1% profit potential when the trade was initiated.

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 winning trades 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.

 

Request Call

 

October 5th, 2021 - Video

 

October 5th, 2021

October 5th, 2021

Resilient ‘Buy’ Signal for CBRE

Yesterday, we looked at a Daily Price Chart of Tesla Inc., noting that the stock’s OBV line is sloping up validating the stock’s bullish run.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for CBRE Group, Inc. stock symbol: CBRE.

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

CBRE Group, Inc. operates as a commercial real estate services and investment company worldwide. It operates through Advisory Services, Global Workplace Solutions, and Real Estate Investments segments. The Advisory Services segment provides strategic advice and execution to owners, investors, and occupiers of real estate in connection with leasing; property sales and mortgage services under the CBRE Capital Markets brand.

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

Below is a 10-Month Simple Moving Average chart for CBRE Group, Inc.

Buy CBRE Stock

As the chart shows, in October 2020, the CBRE 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for CBRE 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 CBRE is 104.65 per share.

92.3% Profit Potential for CBRE Option

Now, since CBRE’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 CBRE 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 CBRE 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 CBRE option example, we used the 1% Rule to select the CBRE 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 CBRE in-the-money option strike price, CBRE 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 CBRE stock is flat at 99.04 at option expiration, it will only result in an 8.2% loss for the CBRE 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 CBRE on 10/4/2021 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 CBRE stock increases 5.0% at option expiration to 103.99 (circled), the call option would make 42.1% before commission.

If CBRE stock increases 10.0% at option expiration to 108.94 (circled), the call option would make 92.3% 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 winning trades 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.

 

Request Call

 

October 4th, 2021

October 4th, 2021

Buying Pressure Pushes TSLA Higher

Dear Reader,

On Friday, we looked at a Daily Price Chart of ConocoPhillips, noting the stock’s 24/52 Day MACD line is trading above the 18-Day EMA signaling a ‘Buy’.

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

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

Tesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company operates in two segments, Automotive, and Energy Generation and Storage.

Confirming a Price Uptrend with OBV

The TSLA daily price chart below shows that TSLA is in a price uptrend as the current price is above the price TSLA 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 TSLA 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 up trend.

Confirmed ‘Buy’ Signal for TSLA

Since TSLA's OBV line is sloping up, the most likely future price movement for TSLA is up, making TSLA a good candidate for a stock purchase or a debit spread trade.

Let's use the Hughes Optioneering calculator to look at the potential returns for a TSLA 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 TSLA 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 TSLA on 10/1/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $1,838 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if TSLA stock is flat or up at all at expiration the spread will realize a 63.2% return (circled).

And if TSLA decreases 7.5% at option expiration, the option spread would make a 63.2% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 63.2% profit potential when the trade was initiated.

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 winning trades 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.

 

Request Call

 

October 1st, 2021

October 1st, 2021

Wave of Momentum Drives COP Stock

Yesterday, we looked at a Daily Price Chart of United Rentals, Inc., noting the stock is trading below the upper Keltner Channel in the Keltner Channel ‘Buy’ zone.

For today’s Trade of the Day e-letter we will be looking at a Moving Average Convergence/ Divergence (MACD) chart for ConocoPhillips stock symbol: COP.

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

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids worldwide. The company primarily engages in the conventional and tight oil reservoirs, shale gas, heavy oil, LNG, oil sands, and other production operations. Its portfolio includes unconventional plays in North America; conventional assets in North America, Europe, Asia, and Australia; various LNG developments; oil sands assets in Canada; and an inventory of conventional and unconventional exploration prospects.   

MACD Indicator confirms Price Momentum

The COP daily price chart below shows that COP 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.

MACD uses moving averages to create a momentum indicator by subtracting the longer-term moving average from the shorter-term moving average. The MACD is calculated by subtracting a stock’s longer term 52-Day Exponential Moving Average (EMA) from its shorter term 24-Day EMA. This creates the MACD line.

MACD ‘Buy’ Signal

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. When the 24/52 Day MACD lines crosses below the 18-Day EMA it indicates negative momentum and lower prices for the stock. MACD is more of a leading indicator than a moving average cross over which tends to lag price movement.

MACD Histogram shows Acceleration of Momentum

Also included in a MACD chart is the histogram bar graph. This portion of the chart helps to illustrate the distance between the 24/52 Day MACD and the 18-Day EMA.

When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink this indicates a narrowing of the gap between the 24/52 Day MACD and the 18-Day EMA and a slowing of the stock’s momentum. When the gap between the two indicators begins to narrow, this typically indicates a crossover of the indicator lines could happen soon.

Buy COP 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 COP’s bullish run is likely to continue, the stock should be purchased.

Our initial price target for COP stock is 75.50 per share.

104.0% Profit Potential for COP Option

Now, since COP’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 COP 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 COP 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 COP option example, we used the 1% Rule to select the COP 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 COP in-the-money option strike price, COP 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 COP stock is flat at 67.77 at option expiration, it will only result in a 6.2% loss for the COP 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 will 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 COP on 9/30/2021 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 COP stock increases 5.0% at option expiration to 71.16 (circled), the call option would make 48.9% before commission.

If COP stock increases 10.0% at option expiration to 74.55 (circled), the call option would make 104.0% 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 winning trades 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.

Request Call

 

September 30th, 2021

September 30th, 2021

‘Buy Zone’ Alert for URI Stock

Yesterday, we looked at a Monthly Price Chart of Bank Of America Corp. noting the stock’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 United Rentals, Inc. stock symbol: URI.

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

United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It operates in two segments, General Rentals; and Trench, Power and Fluid Solutions. The General Rentals segment rents general construction and industrial equipment, including backhoes, skid-steer loaders, forklifts, earthmoving equipment, and material handling equipment; aerial work platforms, such as boom lifts and scissor lifts; and general tools and light equipment comprising pressure washers, water pumps, and power tools.

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

Buy URI 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, it’s price will typically decline soon after as the inevitable profit taking occurs.

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

But, in every scenario when URI 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 URI stock is 395.00 per share.

ch.jpg 

Profit if URI is Up, Down or Flat

Now, since URI stock is trading in the Keltner Channel ‘Buy Zone’ this offers a prime trade entry point. Let’s use the Hughes Optioneering calculator to look at the potential returns for a URI 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 10.0% increase to a 10.0% decrease in URI 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 URI on 9/29/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $610 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if URI stock is flat or up at all at expiration the spread will realize a 63.9% return (circled).

And if URI stock decreases 10.0% at option expiration, the option spread would make a 63.9% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 63.9% profit potential when the trade was initiated.

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 winning trades 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.

 

Request Call

September 29th, 2021

September 29th, 2021

Bank of America Flashes 'Buy' Signal

Yesterday, we looked at a Daily Price Chart of Analog Devices, Inc., noting that the stock’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Bank Of America Corp. stock symbol: BAC.

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

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. Its Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit and IRAs, noninterest-and interest-bearing checking accounts, and investment accounts and products; and credit and debit cards, residential mortgages, and home equity loans, and more.

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

Below is a 10-Month Simple Moving Average chart for Bank Of America Corp.

Buy BAC Stock

As the chart shows, in November 2020, the BAC 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for BAC 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 BAC stock is 45.50 per share.

ch.jpg

111.8% Profit Potential for BAC Option

Now, since BAC stock’s 1-Month Price is currently 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 BAC 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 BAC 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 BAC option example, we used the 1% Rule to select the BAC 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 BAC in-the-money option strike price, BAC 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 BAC stock is flat at 43.16 at option expiration, it will only result in a 10.5% loss for the BAC 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 will 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 BAC on 9/28/2021 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 BAC stock increases 5.0% at option expiration to 45.32 (circled), the call option would make 50.7% before commission.

If BAC stock increases 10.0% at option expiration to 47.48 (circled), the call option would make 111.8% 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 winning trades 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.

 

Request Call

 

September 28th, 2021 - Video

September 28th, 2021

September 28th, 2021

Definitive ‘Buy’ Signal for Chip Maker

Yesterday, we looked at a Daily Price Chart for Paycom Software, Inc. noting that the stock’s OBV is sloping up, validating the stock’s bullish trend.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for Analog Devices, Inc. stock symbol: ADI.

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

Analog Devices, Inc. designs, manufactures, tests, and markets integrated circuits (ICs), software, and subsystems that leverage analog, mixed-signal, and digital signal processing technologies. The company offers data converter products, which translate real-world analog signals into digital data, as well as translates digital data into analog signals; high-performance amplifiers to condition analog signals; and radio frequency and microwave ICs to support cellular infrastructure. 

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

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

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 ADI Stock

As the chart shows, on June 2nd, 2020, the ADI 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for ADI 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 ADI stock is 185.00 per share.

96.6% Profit Potential for ADI Option

Now, since ADI’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 ADI 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 ADI 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 ADI option example, we used the 1% Rule to select the ADI 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 ADI in-the-money option strike price, ADI 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 ADI stock is flat at 176.91 at option expiration, it will only result in a 3.9% loss for the ADI 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 will 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 ADI on 9/27/2021 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 ADI stock increases 5.0% at option expiration to 185.76 (circled), the call option would make 46.3% before commission.

If ADI stock increases 10.0% at option expiration to 194.60 (circled), the call option would make 96.6% 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 winning trades 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.

 

Request Call

 September 27th, 2021

September 27th, 2021

Increasing Buying Pressure for PAYC

On Friday, we looked at a Daily Price Chart of Thermo Fisher Scientific Inc., noting the stock has been making a series of 52-Week Highs since mid-September.

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

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

Paycom Software, Inc. provides cloud-based human capital management (HCM) solution delivered as software-as-a-service for small to mid-sized companies in the United States. It offers functionality and data analytics that businesses need to manage the employment life cycle from recruitment to retirement.

Confirming a Price Uptrend with OBV

The PAYC daily price chart below shows that PAYC is in a price uptrend as the current price is above the price PAYC 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 PAYC 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 up trend.

Confirmed ‘Buy’ Signal for PAYC

Since PAYC's OBV line is sloping up, the most likely future price movement for PAYC is up, making PAYC a good candidate for a stock purchase or a debit spread trade.

Let's use the Hughes Optioneering calculator to look at the potential returns for a PAYC 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 10.0% increase to a 10.0% decrease in PAYC 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 PAYC on 9/24/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $620 (circled). The maximum risk for an option spread is the cost of the spread.

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

And if PAYC decreases 10.0% at option expiration, the option spread would make 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 initiated.

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 winning trades 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.

  

Request Call

  

September 24th, 2021

September 24th, 2021

New Highs for Thermo Fisher

Yesterday, we looked at a Daily Price Chart of BJ’s Wholesale Club Holdings, Inc. noting the stock 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 Thermo Fisher Scientific Inc. stock symbol: TMO.

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

Thermo Fisher Scientific Inc. offers life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and service worldwide. The company's Life Sciences Solutions segment offers reagents, instruments, and consumables for biological and medical research, discovery, and production of drugs and vaccines, as well as diagnosis of infections and diseases to pharmaceutical, biotechnology, agricultural, clinical, healthcare, academic, and government markets. 

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

Buy TMO Stock

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

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 TMO stock is 655.00 per share.

Profit if TMO is Up, Down or Flat

Now, since TMO is currently making a series of 52-Week Highs and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a TMO 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 TMO 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 TMO on 9/23/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $660 (circled). The maximum risk for an option spread is the cost of the spread.

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

And if TMO 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 initiated.

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 winning trades 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.

Trade High Priced Stocks for $350 With Less Risk

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 Google for $350. If you were to purchase 100 shares of Google at current prices it would cost about $264,000. With the stock purchase you are risking $264,000 but with a Google option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

September 23rd, 2021

September 23rd, 2021

Prime ‘Buy’ Signal for Wholesale Club

Yesterday, we looked at a Daily Price Chart for CoreSite Realty Corp. noting that the stock had retraced below the upper Keltner Channel in the ‘Buy Zone’.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for BJ’s Wholesale Club Holdings, Inc. stock symbol: BJ.

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

BJ's Wholesale Club Holdings, Inc., together with its subsidiaries, operates warehouse clubs on the east coast of the United States. It offers perishable, edible grocery, general merchandise, and non-edible grocery products, as well as gasoline and other ancillary services. The company also sells its products through its website and mobile app. 

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

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

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 BJ Stock

As the chart shows, on January 19th, the BJ 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for BJ 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 BJ stock is 65.75 per share.

122.0% Profit Potential for BJ Option

Now, since BJ’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 BJ 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 BJ 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 BJ option example, we used the 1% Rule to select the BJ 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 BJ in-the-money option strike price, BJ 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 BJ stock is flat at 58.98 at option expiration, it will only result in a 10.6% loss for the BJ 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 will 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 BJ on 9/22/2021 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 BJ stock increases 5.0% at option expiration to 61.93 (circled), the call option would make 55.7% before commission.

If BJ stock increases 10.0% at option expiration to 64.88 (circled), the call option would make 122.0% before commission and outperform the stock return more than 12 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 winning trades 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.

 

September 22, 2021

September 22nd, 2021

Data Center REIT in the ‘Buy Zone’

Yesterday, we looked at a Daily Price Chart of Repligen Corp. noting the stock’s OBV line is sloping up, validating the stock’s bullish movement.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for CoreSite Realty Corp. stock symbol: COR.

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

CoreSite Realty Corporation delivers secure, reliable, high-performance data center, cloud access and interconnection solutions to a growing customer ecosystem across eight key North American markets. More than 1,375 of the world's leading enterprises, network operators, cloud providers, and supporting service providers choose CoreSite to connect, protect and optimize their performance-sensitive data, applications and computing workloads.

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

Buy COR 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, it’s price will typically decline soon after as the inevitable profit taking occurs.

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

But, in every scenario when COR 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 COR stock is 160.00 per share.

92.5% Profit Potential for COR Option

Now, since COR stock is currently trading below the upper Keltner Channel in the ‘Buy Zone’, this offers a prime trade entry opportunity. Let’s use the Hughes Optioneering calculator to look at the potential returns for a COR 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 COR 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 COR option example, we used the 1% Rule to select the COR 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 COR in-the-money option strike price, COR 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 COR stock is flat at 150.46 at option expiration, it will only result in a 2.5% loss for the COR 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 will 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 COR on 9/21/2021 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 COR stock increases 5.0% at option expiration to 157.98 (circled), the call option would make 45.0% before commission.

If COR stock increases 10.0% at option expiration to 165.51 (circled), the call option would make 92.5% 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 winning trades 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.

 

September 21th, 2021-Video

 

September 21th, 2021

September 21st, 2021

Medical Instruments Co. Trending Up

Yesterday, we looked at a Monthly Price Chart of Lululemon Athletica Inc., noting the stock’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 Repligen Corp. stock symbol: RGEN.

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

Repligen Corporation develops and commercializes bioprocessing technologies and systems for use in biological drug manufacturing process in North America, Europe, the Asia Pacific, and internationally. It offers Protein A ligands that are the binding components of Protein A affinity chromatography resins; and cell culture growth factor products.

Confirming a Price Uptrend with OBV

The RGEN daily price chart below shows that RGEN is in a price uptrend as the current price is above the price RGEN 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 RGEN 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 up trend.

Confirmed ‘Buy’ Signal for RGEN

Since RGEN's OBV line is sloping up, the most likely future price movement for RGEN is up, making RGEN a good candidate for a stock purchase or a debit spread trade.

Let's use the Hughes Optioneering calculator to look at the potential returns for a RGEN 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 RGEN 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 RGEN on 9/20/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $605 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if RGEN stock is flat or up at all at expiration the spread will realize a 65.3% return (circled).

And if RGEN stock decreases 7.5% at option expiration, the option spread would make a 65.3% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 65.3% profit potential when the trade was initiated.

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 winning trades 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.

September 20th, 2021

September 20th, 2021

Lululemon Stock on Powerful Bull Run

On Friday, we looked at a Daily Price Chart of DexCom Inc., noting the stock’s OBV line is sloping up validating the stock’s bullish trend.

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

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

Lululemon Athletica Inc., together with its subsidiaries, designs, distributes, and retails athletic apparel and accessories for women and men. It operates through two segments, Company-Operated Stores and Direct to Consumer.

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

Below is a 10-Month Simple Moving Average chart for Lululemon Athletica Inc.

Buy LULU Stock

As the chart shows, in June 2021, the LULU 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for LULU 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 LULU is 470.00 per share.

Profit if LULU is Up, Down or Flat

Now, since LULU’s 1-Month Price is currently trading above the 10-Month SMA 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 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 9/17/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $612 (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 63.4% return (circled).

And if LULU stock decreases 7.5% at option expiration, the option spread would make a 63.4% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 63.4% profit potential when the trade was initiated.

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 winning trades 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.

 

September 1​7th, 2021

September 17th, 2021

Increased Buying Sends DXCM Upward

Yesterday, we looked at a Daily Price Chart of Blackstone Group Inc., noting the stock’s 24/52 Day MACD line is trading above the 18-Day EMA signaling a ‘Buy’.

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

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

DexCom, Inc., a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring systems in the United States and internationally. The company offers its systems for use by people with diabetes, as well as for use by healthcare providers. Its products include DexCom G6, an integrated CGM system for diabetes management; Dexcom G7, a next generation G7 CGM system; and Dexcom Share, a remote monitoring system.

Confirming a Price Uptrend with OBV

The DXCM daily price chart below shows that DXCM is in a price uptrend as the current price is above the price DXCM 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 DXCM 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 up trend.

Confirmed ‘Buy’ Signal for DXCM

Since DXCM's OBV line is sloping up, the most likely future price movement for DXCM is up, making DXCM a good candidate for a stock purchase or a debit spread trade.

Let's use the Hughes Optioneering calculator to look at the potential returns for a DXCM 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 DXCM 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 DXCM on 9/16/2021 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 DXCM stock is flat or up at all at expiration the spread will realize a 66.7% return (circled).

And if DXCM stock decreases 7.5% at option expiration, the option spread would make 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 initiated.

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 winning trades 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.

 

September 1​6th, 2021

September 16th, 2021

Strong Bullish Trend for BX Shares

Yesterday, we looked at a Monthly Price Chart of Atlassian Corp., noting that the stock’s 1-Month Price is trading above the 10-Month SMA.

For today’s Trade of the Day e-letter we will be looking at a Moving Average Convergence/ Divergence (MACD) chart for Blackstone Group Inc. stock symbol: BX.

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

The Blackstone Group Inc. is an alternative asset management firm specializing in real estate, private equity, hedge fund solutions, credit, secondary funds of funds, public debt and equity and multi-asset class strategies. The firm typically invests in early-stage companies. It also provide capital markets services.   

MACD Indicator confirms Price Momentum

The BX daily price chart below shows that BX 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.

MACD uses moving averages to create a momentum indicator by subtracting the longer-term moving average from the shorter-term moving average. The MACD is calculated by subtracting a stock’s longer term 52-Day Exponential Moving Average (EMA) from its shorter term 24-Day EMA. This creates the MACD line.

MACD ‘Buy’ Signal

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. When the 24/52 Day MACD lines crosses below the 18-Day EMA it indicates negative momentum and lower prices for the stock. MACD is more of a leading indicator than a moving average cross over which tends to lag price movement.

MACD Histogram shows Acceleration of Momentum

Also included in a MACD chart is the histogram bar graph. This portion of the chart helps to illustrate the distance between the 24/52 Day MACD and the 18-Day EMA.

When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink this indicates a narrowing of the gap between the 24/52 Day MACD and the 18-Day EMA and a slowing of the stock’s momentum. When the gap between the two indicators begins to narrow, this typically indicates a crossover of the indicator lines could happen soon.

 

Buy BX 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 BX’s bullish run is likely to continue, the stock should be purchased.

Our initial price target for BX stock is 148.50 per share.

112.4% Profit Potential for BX Option

Now, since BX’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 BX 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 BX 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 BX option example, we used the 1% Rule to select the BX 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 BX in-the-money option strike price, BX 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 BX stock is flat at 134.60 at option expiration, it will only result in a 6.4% loss for the BX 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 will 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 BX on 9/15/2021 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 BX stock increases 5.0% at option expiration to 141.33 (circled), the call option would make 53.0% before commission.

If BX stock increases 10.0% at option expiration to 148.06 (circled), the call option would make 112.4% 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 winning trades 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.

 

September 1​5th, 2021

September 15th, 2021

Sustained ‘Buy’ Signal for TEAM Shares

Yesterday, we looked at a Daily Price Chart of the Technology Select Sector SPDR ETF, noting that the ETF had retraced into the Keltner Channel ‘Buy Zone’.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Atlassian Corp. stock symbol: TEAM.

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

Atlassian Corporation Plc, through its subsidiaries, designs, develops, licenses, and maintains various software products worldwide. Its products include JIRA, a workflow management system for teams to plan, track, collaborate, and manage work, and projects; Jira Service Management, a service desk product for creating and managing service experiences for various service team providers, including IT, legal, and HR teams

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

Below is a 10-Month Simple Moving Average chart for Atlassian Corp.

Buy TEAM Stock

As the chart shows, in January 2020, the TEAM 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for TEAM 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 TEAM is 422.00 per share.

Profit if TEAM is Up, Down or Flat

Now, since TEAM’s 1-Month Price is currently trading above the 10-Month SMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a TEAM 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 TEAM 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 TEAM on 9/14/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $565 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if TEAM stock is flat or up at all at expiration the spread will realize a 77.0% return (circled).

And if TEAM stock decreases 7.5% at option expiration, the option spread would make a 77.0% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 77.0% profit potential when the trade was initiated.

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 winning trades 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.

 

September 14th, 2021

September 14th, 2021

‘Buy Zone’ Alert for Technology ETF

Yesterday, we looked at a Daily Price Chart of Zoetis Inc. noting the stock’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for the Technology Select Sector SPDR ETF, symbol: XLK.

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

The XLK ETF seeks investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in the Technology Select Sector Index. In seeking to track the performance of the index, the fund employs a replication strategy, which means that the fund typically invests in substantially all of the securities represented in the index in approximately the same proportions as the index.

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

Buy the XLK ETF

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

Even ETFs that are in the strongest bull trends do not advance in a straight line. There are always price retracements along the way. When an ETF becomes overbought, it’s price will typically decline soon after as the inevitable profit taking occurs.

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

But, in every scenario when XLK became overbought, the ETF soon experienced a pullback.

Finding opportunities when an ETF 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 an ETF 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 ETF is likely to rally.

Our initial price target for the XLK ETF is 161.34 per share.

130.1% Profit Potential for XLK Option

Now, since XLK’s price has retraced into 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 XLK 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 XLK 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 XLK option example, we used the 1% Rule to select the XLK 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 XLK in-the-money option strike price, XLK 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 XLK is flat at 156.68 at option expiration, it will only result in a 6.7% loss for the XLK 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 will 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 XLK on 9/13/2021 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 XLK increases 5.0% at option expiration to 164.51 (circled), the call option would make 61.7% before commission.

If XLK increases 10.0% at option expiration to 172.35 (circled), the call option would make 130.1% before commission and outperform the ETF return 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 winning trades 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.

 

September 13th, 2021-Video

 

 

September 13th, 2021

September 13th, 2021

Animal Healthcare Stock Shows Strong 'Buy'

On Friday, we looked at a Daily Price Chart for Aon Corp. noting the stock’s 24/52 Day MACD line is trading above the 18-Day EMA.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for Zoetis Inc. stock symbol: ZTS.

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

Zoetis Inc. discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products in the United States and internationally. It commercializes products primarily across species, including livestock, such as cattle, swine, poultry, fish, and sheep; and companion animals comprising dogs, cats, and horses.

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

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

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 ZTS Stock

As the chart shows, on April 17th, 2021, the ZTS 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for ZTS 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 ZTS stock is 225.00 per share.

109.4% Profit Potential for ZTS Option

Now, since ZTS’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 ZTS 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 ZTS 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 ZTS option example, we used the 1% Rule to select the ZTS 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 ZTS in-the-money option strike price, ZTS 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 ZTS stock is flat at 207.00 at option expiration, it will only result in a 5.6% loss for the ZTS 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 will 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 ZTS on 9/10/2021 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 ZTS stock increases 5.0% at option expiration to 217.35 (circled), the call option would make 51.9% before commission.

If ZTS stock increases 10.0% at option expiration to 227.70 (circled), the call option would make 109.4% before commission and outperform the stock return nearly 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 winning trades 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.

 

September 10th, 2021

September 10th, 2021

Momentum Drives AON's Bullish Run

Yesterday, we looked at a Daily Price Chart of Edwards Lifesciences Corp, noting that the stock has been making a series of 52-Week Highs.

For today’s Trade of the Day e-letter we will be looking at a Moving Average Convergence/ Divergence (MACD) chart for Aon Corp. stock symbol: AON.

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

Aon plc, a professional services firm, provides advice and solutions to clients focused on risk, retirement, and health worldwide. It offers commercial risk solutions, including retail brokerage, cyber, and global risk consulting solutions, as well as acts as a captive insurance solutions provider; and health solutions, such as health and benefits brokerages, and health care exchanges.  

MACD Indicator confirms Price Momentum

The AON daily price chart below shows that AON 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.

MACD uses moving averages to create a momentum indicator by subtracting the longer-term moving average from the shorter-term moving average. The MACD is calculated by subtracting a stock’s longer term 52-Day Exponential Moving Average (EMA) from its shorter term 24-Day EMA. This creates the MACD line.

MACD ‘Buy’ Signal

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. When the 24/52 Day MACD lines crosses below the 18-Day EMA it indicates negative momentum and lower prices for the stock. MACD is more of a leading indicator than a moving average cross over which tends to lag price movement.

MACD Histogram shows Acceleration of Momentum

Also included in a MACD chart is the histogram bar graph. This portion of the chart helps to illustrate the distance between the 24/52 Day MACD and the 18-Day EMA.

When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink this indicates a narrowing of the gap between the 24/52 Day MACD and the 18-Day EMA and a slowing of the stock’s momentum. When the gap between the two indicators begins to narrow, this typically indicates a crossover of the indicator lines could happen soon.

Buy AON 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 AON’s bullish run is likely to continue, the stock should be purchased.

Our initial price target for AON stock is 318.00 per share.

123.0% Profit Potential for AON Option

Now, since AON’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 an AON 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 AON 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 AON option example, we used the 1% Rule to select the AON 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 AON in-the-money option strike price, AON 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 AON stock is flat at 292.38 at option expiration, it will only result in a 3.3% loss for the AON 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 will 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 AON on 9/9/2021 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 AON stock increases 5.0% at option expiration to 307.00 (circled), the call option would make 59.8% before commission.

If AON stock increases 10.0% at option expiration to 321.62 (circled), the call option would make 123.0% before commission and outperform the stock return more than 12 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 winning trades 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.

Average Portfolio Return of 475.9%

Below is a screenshot of the current open trade profit results from Chuck’s Weekly Option Alert Trading Service. There are currently $637,552.42 in open trade profits with an average portfolio return of 475.9% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios.

 

September 9th, 2021

September 9th, 2021

Fresh Highs for EW Stock

Yesterday, we looked at a Daily Price Chart of Cloudflare Inc. noting the stock’s OBV line is sloping up validating the stock’s bullish trend.

For today’s Trade of the Day we will be looking at a Daily Price chart for Edwards Lifesciences Corp. stock symbol: EW.

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

Edwards Lifesciences Corporation provides products and technologies for structural heart disease, and critical care and surgical monitoring in the United States, Europe, Japan, and internationally. It offers transcatheter heart valve replacement products for the minimally invasive replacement of heart valves; and transcatheter heart valve repair and replacement products to treat mitral and tricuspid valve diseases. 

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

Buy EW Stock

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

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 EW stock is 135.00 per share.

108.4% Profit Potential for EW Option

Now, since EW stock is currently making a series of 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 EW 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 EW 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 EW option example, we used the 1% Rule to select the EW 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 EW in-the-money option strike price, EW 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 EW stock is flat at 122.75 at option expiration, it will only result in a 2.7% loss for the EW 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 will 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 EW on 9/8/2021 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 EW stock increases 5.0% at option expiration to 128.89 (circled), the call option would make 52.8% before commission.

If EW stock increases 10.0% at option expiration to 135.03 (circled), the call option would make 108.4% before commission and outperform the stock return nearly 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 winning trades 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.

September 8th, 2021

September 8th, 2021

Increased Buying Pressure for NET

Yesterday, we looked at a Daily Price Chart of the Direxion Daily Technology Bull 3X ETF, noting that TECL’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’.

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

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

CloudFlare, Inc. operates a cloud platform that delivers a range of network services to businesses worldwide. The company provides an integrated cloud-based security solution to secure a range of combination of platforms, including public cloud, private cloud, on-premise, software-as-a-service applications, and Internet of Things (IoT) devices. Its security products comprise cloud firewall, bot management, distributed denial of service, IoT, SSL/TLS, secure origin connection, and rate limiting products.

Confirming a Price Uptrend with OBV

The NET daily price chart below shows that NET is in a price uptrend as the current price is above the price NET 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 NET 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 up trend.

Confirmed ‘Buy’ Signal for NET

Since NET's OBV line is sloping up, the most likely future price movement for NET is up, making NET a good candidate for a stock purchase or a debit spread trade.

Let's use the Hughes Optioneering calculator to look at the potential returns for a NET 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 NET 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 NET on 9/7/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $305 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if NET stock is flat or up at all at expiration the spread will realize a 63.9% return (circled).

And if NET stock decreases 7.5% at option expiration, the option spread would make a 63.9% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 63.9% profit potential when the trade was initiated.

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 winning trades 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.

 

Sept​ember​ ​7th, 2021-Video

 

 

September 7th, 2021

September 7th, 2021

Technology ETF Shows Powerful 'Buy'

On Friday, we looked at a Daily Price Chart the First Trust NASDAQ Cybersecurity ETF noting that CIBR has been making a series of 52-Week Highs.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for the Direxion Daily Technology Bull 3X ETF symbol: TECL.

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

The TECL ETF seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Technology Select Sector Index. The index includes domestic companies from the technology sector.

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

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

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/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 TECL ETF

As the chart shows, on June 18th, 2020, the TECL 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for the TECL ETF exceeded the selling pressure. For this kind of crossover to occur, a ETF 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 TECL ETF is 76.00 per share.

92.1% Profit Potential for TECL Option

Now, since TECL’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 a TECL 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 TECL 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 TECL option example, we used the 1% Rule to select the TECL 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 TECL in-the-money option strike price, the TECL 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 stock/ETF closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if the TECL ETF is flat at 69.15 at option expiration, it will only result in a 9.6% loss for the TECL 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 will 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/ETFs.

The prices and returns represented below were calculated based on the current ETF and option pricing for TECL on 9/3/2021 before commissions.

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

For this specific call option, the calculator analysis below reveals if the TECL ETF increases 5.0% at option expiration to 72.61 (circled), the call option would make 41.3% before commission.

If the TECL ETF increases 10.0% at option expiration to 76.07 (circled), the call option would make 92.1% before commission and outperform the ETF return more than 9 to 1.

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

The Hughes Optioneering Team is here to help you identify winning trades 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.

 

September 3rd, 2021

September 3rd, 2021

New Highs for Cybersecurity ETF

Yesterday, we looked at a Daily Price Chart of Credit Acceptance Corp. noting the stock’s 24/52 Day MACD line is trading above the 9-Day EMA.

For today’s Trade of the Day we will be looking at a Daily Price chart for the First Trust NASDAQ Cybersecurity ETF, symbol: CIBR.

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

The CIBR ETF seeks investment results that correspond generally to the price and yield of an equity index called the Nasdaq CTA Cybersecurity Index. The fund will normally invest at least 90% of its net assets in the common stocks and depositary receipts that comprise the index. The index includes securities of companies classified as "cyber security" companies by the CTA.

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

Buy the CIBR ETF

The Daily Price chart above shows that the CIBR ETF has been hitting new 52-Week Highs regularly since late August.

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 CIBR is 55.15 per share.

95.6% Profit Potential for CIBR Option

Now, since the CIBR ETF is currently making a series of 52-Week Highs this means the ETF’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a CIBR 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 CIBR 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 CIBR option example, we used the 1% Rule to select the CIBR 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 CIBR in-the-money option strike price, CIBR 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 CIBR ETF is flat at 52.15 at option expiration, it will only result in a 2.8% loss for the CIBR 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 will 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 CIBR on 9/2/2021 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 CIBR increases 5.0% at option expiration to 54.76 (circled), the call option would make 46.4% before commission.

If CIBR increases 10.0% at option expiration to 57.37 (circled), the call option would make 95.6% before commission and outperform the stock return nearly 10 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 winning trades 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.

Average Portfolio Return of 190.1%

Below is a screenshot of the current open trade profit results from Chuck’s Inner Circle Trading Service. There are currently $417,406.10 in open trade profits with an average portfolio return of 190.1% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios.

 

September 2nd, 2021

September 2nd, 2021

Bullish Run for Credit Services Stock

Yesterday, we looked at a Daily Price Chart of Comcast Corp., noting that the stock’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day e-letter we will be looking at a Moving Average Convergence/ Divergence (MACD) chart for Credit Acceptance Corp. stock symbol: CACC.

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

Credit Acceptance Corporation provides financing programs, and related products and services to independent and franchised automobile dealers in the United States. The company advances money to dealers in exchange for the right to service the underlying consumer loans; and buys the consumer loans from the dealers and keeps various amounts collected from the consumers.  

MACD Indicator confirms Price Momentum

The CACC daily price chart below shows that CACC 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.

MACD uses moving averages to create a momentum indicator by subtracting the longer-term moving average from the shorter-term moving average. The MACD is calculated by subtracting a stock’s longer term 52-Day Exponential Moving Average (EMA) from its shorter term 24-Day EMA. This creates the MACD line.

MACD ‘Buy’ Signal

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. When the 24/52 Day MACD lines crosses below the 18-Day EMA it indicates negative momentum and lower prices for the stock. MACD is more of a leading indicator than a moving average cross over which tends to lag price movement.

MACD Histogram shows Acceleration of Momentum

Also included in a MACD chart is the histogram bar graph. This portion of the chart helps to illustrate the distance between the 24/52 Day MACD and the 18-Day EMA.

When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink this indicates a narrowing of the gap between the 24/52 Day MACD and the 18-Day EMA and a slowing of the stock’s momentum. When the gap between the two indicators begins to narrow, this typically indicates a crossover of the indicator lines could happen soon.

Buy CACC 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 CACC’s bullish run is likely to continue, the stock should be purchased.

Our initial price target for CACC stock is 640.00 per share.

Profit if CACC is Up, Down or Flat

Now, since CACC’s 24/52 Day MACD line is trading above the 18-Day EMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a CACC 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 CACC 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 CACC on 9/1/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $590 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if CACC is flat or up at all at expiration the spread will realize a 69.5% return (circled).

And if CACC decreases 7.5% at option expiration, the option spread would make a 69.5% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 69.5% profit potential when the trade was initiated.

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 winning trades 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.

September 1st, 2021

September 1st, 2021

Comcast Shows Strong ‘Buy’

Yesterday, we looked at a Monthly Price Chart for Facebook, Inc. noting that the stock’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 Comcast Corp. stock symbol: CMCSA.

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

Comcast Corporation operates as a media and technology company worldwide. It operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, Theme Parks, and Sky segments. The Cable Communications segment offers cable services, including high-speed Internet, video, voice, wireless, and security and automation services to residential and business customers under the Xfinity brand, as well as sells advertising. 

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

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

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 CMCSA Stock

As the chart shows, on July 16th, 2020, the CMCSA 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for CMCSA 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 CMCSA stock is 64.00 per share.

102.6% Profit Potential for CMCSA Option

Now, since CMCSA’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 CMCSA 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 CMCSA 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 CMCSA option example, we used the 1% Rule to select the CMCSA 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 CMCSA in-the-money option strike price, CMCSA 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 CMCSA stock is flat at 60.68 at option expiration, it will only result in a 2.1% loss for the CMCSA 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 will 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 CMCSA on 8/31/2021 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 CMCSA stock increases 5.0% at option expiration to 63.71 (circled), the call option would make 50.2% before commission.

If CMCSA stock increases 10.0% at option expiration to 66.75 (circled), the call option would make 102.6% 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 winning trades 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.

 

August 31, 2021

August 31st, 2021

PowerTrend 'Buy' for Facebook

Yesterday, we looked at a Daily Price Chart of Old Dominion Freight Line, Inc., noting that ODFL’s OBV line is sloping up validating the stock’s bullish trend.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Facebook, Inc. stock symbol: FB.

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

Facebook, Inc. develops products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and in-home devices worldwide. The company's products include Facebook that enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers; Instagram, a community for sharing photos, videos, and private messages; Messenger, a messaging application for people to connect with friends, family, groups, and businesses.

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

Below is a 10-Month Simple Moving Average chart for Facebook, Inc.

Buy FB Stock

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

This crossover indicated the buying pressure for FB 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 FB is 405.00 per share.

Profit if FB is Up, Down or Flat

Now, since FB’s Monthly Price is currently trading above the 10-Month SMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a FB 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 FB 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 FB on 8/30/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $320 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if FB stock is flat or up at all at expiration the spread will realize a 56.3% return (circled).

And if FB 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’ 56.3% profit potential when the trade was initiated.

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 winning trades 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.

 

August 30th, 2021-Video

August 30th, 2021

August 30th, 2021

Increased Buying Pressure for ODFL

Dear Reader,

On Friday, we looked at a Monthly Price Chart of Domo, Inc., noting that DOMO’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 Old Dominion Freight Line, Inc. stock symbol: ODFL.

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

Old Dominion Freight Line, Inc. operates as a less-than-truckload (LTL) motor carrier in the United States and North America. It provides regional, inter-regional, and national LTL services, including expedited transportation. The company also offers various value-added services, such as container drayage, truckload brokerage, and supply chain consulting.

Confirming a Price Uptrend with OBV

The ODFL daily price chart below shows that ODFL is in a price uptrend as the current price is above the price ODFL 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 ODFL 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 up trend.

Confirmed ‘Buy’ Signal for ODFL

Since ODFL's OBV line is sloping up, the most likely future price movement for ODFL is up, making ODFL 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 an ODFL 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 ODFL 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 ODFL option example, we used the 1% Rule to select the ODFL 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 ODFL in-the-money option strike price, ODFL 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 ODFL stock is flat at 289.78 at option expiration, it will only result in a 4.9% loss for the ODFL 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 will 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 ODFL on 8/27/2021 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 ODFL stock increases 5.0% at option expiration to 304.27 (circled), the call option would make 64.8% before commission.

If ODFL stock increases 10.0% at option expiration to 318.76 (circled), the call option would make 134.4% before commission and outperform the stock return more than 13 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 winning trades 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.

August 27th, 2021

August 27th, 2021

'Buy' Signal Flashes for DOMO

Yesterday, we looked at a Daily Price Chart of Regeneron Pharmaceuticals, Inc., noting that the stock’s 24/52 Day MACD is trading above the 18-Day EMA.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Domo, Inc. stock symbol: DOMO.

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

Domo, Inc. operates a cloud-based platform in the United States. Its platform digitally connects from the chief executive officer to the frontline employee with the people, data, and systems in an organization, giving them access to real-time data and insights, and allowing them to manage business from smartphones.

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

Below is a 10-Month Simple Moving Average chart for Domo, Inc.

Buy DOMO Stock

As the chart shows, in May 2020, the DOMO 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for DOMO 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 DOMO is 102.50 per share.

Profit if DOMO is Up, Down or Flat

Now, since DOMO’s Monthly Price is currently trading above the 10-Month SMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a DOMO 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 10.0% increase to a 10.0% decrease in DOMO 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 DOMO on 8/26/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $290 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if DOMO is flat or up at all at expiration the spread will realize a 72.4% return (circled).

And if DOMO decreases 10.0% at option expiration, the option spread would make a 72.4% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 72.4% profit potential when the trade was initiated.

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 winning trades 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.

Trade High Priced Stocks for $350 With Less Risk

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 Google for $350. If you were to purchase 100 shares of Google at current prices it would cost about $264,000. With the stock purchase you are risking $264,000 but with a Google option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

 

August 26th, 2021

August 26th, 2021

Momentum Fuels REGN’s Bullish Run

Yesterday, we looked at a Daily Price Chart of Brown & Brown Inc., noting that the stock’s OBV line is in an uptrend which validates BRO’s bullish trend.

For today’s Trade of the Day e-letter we will be looking at a Moving Average Convergence/ Divergence (MACD) chart for Regeneron Pharmaceuticals, Inc. stock symbol: REGN.

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

Regeneron Pharmaceuticals, Inc. discovers, invents, develops, manufactures, and commercializes medicines for treating various medical conditions worldwide. The company's products include EYLEA injection to treat wet age-related macular degeneration and diabetic macular edema; myopic choroidal neovascularization; and diabetic retinopathy, as well as macular edema following retinal vein occlusion, including macular edema following central retinal vein occlusion and macular edema following branch retinal vein occlusion.  

MACD Indicator confirms Price Momentum

The REGN daily price chart below shows that REGN 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.

MACD uses moving averages to create a momentum indicator by subtracting the longer-term moving average from the shorter-term moving average. The MACD is calculated by subtracting a stock’s longer term 52-Day Exponential Moving Average (EMA) from its shorter term 24-Day EMA. This creates the MACD line.

MACD ‘Buy’ Signal

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. When the 24/52 Day MACD lines crosses below the 18-Day EMA it indicates negative momentum and lower prices for the stock. MACD is more of a leading indicator than a moving average cross over which tends to lag price movement.

MACD Histogram shows Acceleration of Momentum

Also included in a MACD chart is the histogram bar graph. This portion of the chart helps to illustrate the distance between the 24/52 Day MACD and the 18-Day EMA.

When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink this indicates a narrowing of the gap between the 24/52 Day MACD and the 18-Day EMA and a slowing of the stock’s momentum. When the gap between the two indicators begins to narrow, this typically indicates a crossover of the indicator lines could happen soon.

Buy REGN 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 REGN’s bullish run is likely to continue, the stock should be purchased.

Our initial price target for REGN stock is 720.00 per share.

 

Profit if REGN is Up, Down or Flat

Now, since REGN’s 24/52 Day MACD is currently trading above the 18-Day EMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a REGN 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 REGN 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 REGN on 8/25/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $260 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if REGN is flat or up at all at expiration the spread will realize a 92.3% return (circled).

And if REGN decreases 7.5% at option expiration, the option spread would make a 92.3% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 92.3% profit potential when the trade was initiated.

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 winning trades 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.

 

August 25th, 2021

August 25th, 2021

Buying Pressure Send BRO Shares Higher

Yesterday, we looked at a Daily Price Chart of BioNTech SE, noting the stock has recently retraced below the upper Keltner Channel in the ‘Buy Zone’.

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

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

Brown & Brown, Inc. markets and sells insurance products and services in the United States, Bermuda, Canada, Cayman Islands, Ireland, and the United Kingdom. It operates through four segments: Retail, National Programs, Wholesale Brokerage, and Services. The company offers builders risk, group medical and pharmaceutical, property, commercial auto, homeowners, reinsurance, crop and hail, inland marine, retirement benefit, cyber, disability, risk mitigating warranty products, directors and officers, management liability, errors and omissions, medical stop loss, term life, excess liability, personal auto, umbrella, general liability, prescription drug, workers compensation, and group dental insurance products.

Confirming a Price Uptrend with OBV

The BRO daily price chart below shows that BRO is in a price uptrend as the current price is above the price BRO 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 BRO 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 up trend.

Confirmed ‘Buy’ Signal for BRO

Since BRO's OBV line is sloping up, the most likely future price movement for BRO is up, making BRO a good candidate for a stock purchase or a 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 57.68 at option expiration, it will only result in a 10.1% 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 will 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 8/24/2021 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 60.56 (circled), the call option would make 86.7% before commission.

If BRO stock increases 10.0% at option expiration to 63.45 (circled), the call option would make 183.5% before commission and outperform the stock return more than 18 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 winning trades 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.

 August 24th, 2021

 

August 24th, 2021

'Buy Zone' Alert for BioNTech

Yesterday, we looked at a Daily Price Chart of Mid-America Apartment Communities Inc. noting the stock’s 50-Day EMA is above the 100-Day EMA.

For today’s Trade of the Day we will be looking at a Keltner Channel chart for BioNTech SE stock symbol: BNTX.

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

BioNTech SE, a biotechnology company, develops and commercializes immunotherapies for cancer and other infectious diseases. The company is involved in the developing of FixVac product candidates, including BNT111, which is in Phase I clinical trial for advance melanoma; BNT112 that is in Phase I/IIa trial for prostate cancer; BNT113, which is in Phase I/II trial to treat HPV+ head and neck cancers; BNT114 that is in Phase I clinical trial for triple negative breast cancer; BNT115 in a Phase I trial in ovarian cancer; and BNT116 for non-small cell lung cancer.

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

Buy BNTX 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, it’s price will typically decline soon after as the inevitable profit taking occurs.

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

But, in every scenario when BNTX 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 BNTX stock is 410.75 per share.

Profit if BNTX is Up, Down or Flat

Now, since BNTX is currently 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 BNTX 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 10.0% increase to a 10.0% decrease in BNTX 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 BNTX on 8/23/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $500 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if BNTX stock is flat or up at all at expiration the spread will realize a 100.0% return (circled).

And if BNTX stock decreases 10.0% at option expiration, the option spread would make a 100.0% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 100.0% profit potential when the trade was initiated.

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 winning trades 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.


August 23th, 2021

August 23rd, 2021

Mid-America Apartment Communities Trending Up

On Friday, we looked at a Daily Price Chart of Endava Plc. noting the stock’s OBV line is sloping up, validating the stock’s bullish trend.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for Mid-America Apartment Communities Inc. stock symbol: MAA.

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

MAA, an S&P 500 company, is a real estate investment trust, or REIT, focused on delivering full-cycle and superior investment performance for shareholders through the ownership, management, acquisition, development and redevelopment of quality apartment communities in the Southeast, Southwest, and Mid-Atlantic regions of the United States.

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

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

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 MAA Stock

As the chart shows, on October 1st, 2020, the MAA 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for MAA 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 MAA stock is 210.00 per share.

106.1% Profit Potential for MAA Option

Now, since MAA’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 MAA 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 MAA 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 MAA option example, we used the 1% Rule to select the MAA 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 MAA in-the-money option strike price, MAA 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 MAA stock is flat at 190.28 at option expiration, it will only result in a 8.2% loss for the MAA 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 will 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 MAA on 8/20/2021 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 MAA stock increases 5.0% at option expiration to 199.79 (circled), the call option would make 48.9% before commission.

If MAA stock increases 10.0% at option expiration to 209.31 (circled), the call option would make 106.1% 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 winning trades 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.

 

 Au​gust 23rd-Video 

August 20th, 2021

August 20th, 2021

Buying Pressure Drives DAVA Higher

Yesterday, we looked at a Monthly Price Chart of Infosys Technologies Ltd., noting the stock’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 Endava Plc. stock symbol: DAVA.

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

Endava plc provides technology services for clients in the consumer products, healthcare, logistics, and retail verticals in Europe, Latin America, and North America. It offers technology and digital advisory services for financial services, healthcare, manufacturing, retail and consumer, business and support services, and TMT sectors; IT strategies; business analysis services in payments, financial services, asset and wealth management, insurance, telecommunications, and digital media areas.

Confirming a Price Uptrend with OBV

The DAVA daily price chart below shows that DAVA is in a price uptrend as the current price is above the price DAVA 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 DAVA 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 up trend.

Confirmed ‘Buy’ Signal for DAVA

Since DAVA's OBV line is sloping up, the most likely future price movement for DAVA is up, making DAVA a good candidate for a stock purchase or a debit spread trade.

Let's use the Hughes Optioneering calculator to look at the potential returns for a DAVA 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 DAVA 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 DAVA on 8/19/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $300 (circled). The maximum risk for an option spread is the cost of the spread.

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

And if DAVA stock decreases 7.5% at option expiration, the option spread would make a 15.8% return (circled).

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

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 winning trades 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.

 August 19th, 2021

August 19th, 2021

Buy Signal Flashes for Infosys Stock

Dear Reader,

Yesterday, we looked at a Daily Price Chart of ProLogis, Inc. noting that PLD has been making a series of 52-Week Highs.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Infosys stock symbol: INFY.

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

Infosys Limited, together with its subsidiaries, provides consulting, technology, outsourcing, and next-generation digital services in North America, Europe, India, and internationally. It provides application development and management, independent validation, product engineering and management, infrastructure management, enterprise application management, and support and integration services.

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

Below is a 10-Month Simple Moving Average chart for Infosys.

Buy INFY Stock

As the chart shows, in July 2020, the INFY 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for INFY 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 INFY is 30.00 per share.

86.7% Profit Potential for INFY Option

Now, since INFY’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 an INFY 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 INFY 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 INFY option example, we used the 1% Rule to select the INFY 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 INFY in-the-money option strike price, INFY 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 INFY stock is flat at 23.47 at option expiration, it will only result in a 4.3% loss for the INFY 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 will 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 INFY on 8/18/2021 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 INFY stock increases 5.0% at option expiration to 24.64 (circled), the call option would make 41.2% before commission.

If INFY stock increases 10.0% at option expiration to 25.82 (circled), the call option would make 86.7% before commission and outperform the stock return more than 8 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 winning trades 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.

 

August 19th, 2021

August 19th, 2021

Buy Signal Flashes for Infosys Stock

Yesterday, we looked at a Daily Price Chart of ProLogis, Inc. noting that PLD has been making a series of 52-Week Highs.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Infosys stock symbol: INFY.

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

Infosys Limited, together with its subsidiaries, provides consulting, technology, outsourcing, and next-generation digital services in North America, Europe, India, and internationally. It provides application development and management, independent validation, product engineering and management, infrastructure management, enterprise application management, and support and integration services.

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

Below is a 10-Month Simple Moving Average chart for Infosys.

Buy INFY Stock

As the chart shows, in July 2020, the INFY 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for INFY 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 INFY is 30.00 per share.

 

86.7% Profit Potential for INFY Option

Now, since INFY’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 an INFY 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 INFY 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 INFY option example, we used the 1% Rule to select the INFY 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 INFY in-the-money option strike price, INFY 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 INFY stock is flat at 23.47 at option expiration, it will only result in a 4.3% loss for the INFY 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 will 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 INFY on 8/18/2021 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 INFY stock increases 5.0% at option expiration to 24.64 (circled), the call option would make 41.2% before commission.

If INFY stock increases 10.0% at option expiration to 25.82 (circled), the call option would make 86.7% before commission and outperform the stock return more than 8 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 winning trades 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.

 

October 4th, 2021
October 4th, 2021
October 4th, 2021
Watch Training Videos

 

Tap into Chuck's Trading Knowledge NOW!