Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 6 views

    2019 July 21

    Uploaded by

    Alejandro Mufardini

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    2019 July 21

    Uploaded by

    Alejandro Mufardini
    6 views15 pages

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    6 views15 pages

    2019 July 21

    Uploaded by

    Alejandro Mufardini

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 15

    Optioneering Newsletter

    July 21, 2019

    In this week’s Optioneering Newsletter we are going to start by reviewing


    the recent price performance of the S&P 500 Index and then look at several
    new profit opportunities.

    $SPX Monthly Chart

    We trade with the trend. If the SPX price is above the monthly moving
    average line, the trend is up. If the SPX price is below the moving
    average line, the trend is down. The current SPX price is above the
    moving average line, so the trend is up. With that in mind, we will review
    four bullish trades today.

    1
    The first profit opportunity we will review this week is a stock purchase in
    MCD, or McDonald's Corporation. McDonald’s Corporation is the world's
    leading global food service retailer.
    MCD Monthly Chart

    The monthly chart shows that MCD has been in a very strong bull trend since
    late 2016.

    2
    MCD Daily Chart

    The daily chart for MCD depicts a very steady bull trend. There isn’t
    much in the way of peaks and valleys, just a steady rise.

    We recommend buying MCD stock at current price levels. The dividend


    yield for MCD is 2.2%.

    3
    The next profit opportunity we will review this week is an option purchase
    in RLI, or RLI Corp. RLI, through its subsidiaries, RLI Insurance Company,
    Mt. Hawley Insurance Company, Underwriters Indemnity Company, and
    Planet Indemnity Company, underwrites selected property and casualty
    insurance products. The RLI products include commercial property and
    inland marine, commercial general liability, commercial umbrella/excess
    liability, a variety of professional liability coverages, surety and fidelity
    bonds, personal insurance products in Hawaii, and other specialty
    coverages.

    RLI Monthly Chart

    The monthly chart shows that RLI has been in a bull trend since the chart
    started in 2012.

    4
    RLI Daily Chart

    The daily chart for RLI is also bullish. Recent trading suggests that the
    pullback from last month’s high could be over and the uptrend could be
    resuming.

    We are going to review a call option purchase for RLI.

    We will first look at selecting a call option strike for purchasing an RLI call
    option. RLI is currently trading at 88.96. Let’s look at buying the
    September 20th expiration 80 strike call. September 20th options have 61
    days to expiration. We will analyze this option using the Optioneering Call
    Option Purchase Calculator.
    The Call Option Purchase Calculator will calculate the profit potential for a
    call option purchase trade based on the price change in the underlying
    stock/ETF at option expiration. In this example the price changes the
    calculator shows will be from a 12.5% increase in the stock price to
    remaining flat at expiration.

    5
    We developed what we call the 1% Rule to help us select an option strike
    price. The 1% rule says to limit the time value portion of the option to less
    than 1% of the stock or ETF price.

    If you limit the time value portion of an option to 1%, the stock price only
    must move up 1% for the option to breakeven and start profiting.

    The calculator will also calculate the time value portion of an option. With
    this option purchase, the time value is 0.74 points (boxed in red). The time
    value of 0.74 is less than 1% of the 88.96 stock price, so this strike price
    qualifies under the 1% Rule.

    Buy to Open the RLI September 20 80–Strike Call

    The second row from bottom of the calculator lists the dollar profit potential.
    The bottom row lists the percent return profit potential. We can see that if
    the RLI stock price increases by 1% (boxed in green) at option expiration, a
    1.5% profit will be realized. This confirms the 1% Rule of profiting with only
    a 1% increase in the stock price.

    6
    Buy to Open the RLI September 20 80–Strike Call

    There is no limit on the profit potential of call option purchases if the


    underlying stock continues to increase in price. If the RLI stock price
    increases by 10% between now and option expiration, the Call Option
    Purchase Calculator shows that the 80-Strike Call will realize an 84.1% or
    $816 profit (boxed in green).

    On the other hand, if RLI is flat at 88.96 on option expiration, the 80-Strike
    Call will only lose -7.6% or -$74. If we bought an at the money or out of the
    money option and the stock price was flat at option expiration it could result
    in a 100% loss.

    Remember, if you purchase an at the money or out of the money strike call
    option and the underlying stock/ETF is flat or down at option expiration, it
    could result in a 100% loss for your option trade!

    Using the 1% Rule to select an option strike price will increase your percentage
    of winning trades compared to trading at the money or out of the money strike
    calls. This higher accuracy can make you a more successful trader.

    We recommend buying the RLI September 20th expiration 80-Strike Call at


    current prices.

    7
    The next profit opportunity we will consider this week is in MDB, or
    MongoDB, Inc. MongoDB is the leading modern, general purpose
    database platform, designed to unleash the power of software and data
    for developers and the applications they build.

    MDB Monthly Chart

    The monthly chart shows that MDB has been in a strong bull trend since
    May 2018. The MDB stock price has more than tripled since then. That’s
    a strong stock!

    8
    MDB Daily Chart

    The daily chart shows that MDB was very bullish from the January low until
    the March high. After that, MDB went sideways until June. After a strong move
    up in June, MSDB has been going sideways again. Sideways trading in a bull
    trend is usually a sign of a pause that will yield to a further advance.

    We are going to review a call option debit spread for MDB.

    Traders who want to use a more leveraged approach can buy MDB calls.

    9
    Buy to Open MDB August 30 140-Strike Call
    Sell to Open MDB August 30 155-Strike Call

    We can see from this call option spread analysis that if the MDB stock
    price declines by -5%, stays where it is, or increases in price when the
    options expire, the spread will make 37.6% or $410. If MDB is down -7.5%
    when the options expire, we will make a 7.3% or $80 profit.

    10
    The last profit opportunity we will review this week is in CYBR, or CyberArk
    Software, Ltd. CYBR provides information technology security solutions.
    CYBR offers services which protect organizational privileged accounts
    from cyber-attacks.

    CYBR Monthly Chart

    The monthly chart shows that CYBR has been in a very strong bull trend
    since early last year. After a brief one-month pause, this month’s trading
    points to a further advance.

    11
    CYBR Daily Chart

    The daily chart shows that the trend has been up since the chart started in
    December. CYBR broke out to a new record high last week. New record highs
    are a positive sign for bullish positions.

    We are going to review a Call Debit Spread trade for CYBR. Traders who
    want a more leveraged approach can buy CYBR calls.

    12
    Buy to Open CYBR August 30 120-Strike Call
    Sell to Open CYBR August 30 133-Strike Call

    We can see from this call option spread analysis that if the CYBR stock
    price declines by -2.5%, stays where it is, or increases in price when the
    options expire, the spread will make a 45.3% or $405 profit. If CYBR is
    down -5% when the options expire, the profit will be 39.5% or $54. If
    CYBR is down -7.5% when the options expire, the profit potential is a
    tiny 0.6% or $5 profit.

    Newsletter Summary
    This week we recommended the following:

    Buy MCD Stock

    Buy to Open the RLI September 20 80-Strike Call

    Buy to Open MDB August 30 140-Strike Call


    Sell to Open MDB August 30 155-Strike Call

    Buy to Open CYBR August 30 120-Strike Call


    Sell to Open CYBR August 30 133-Strike Call

    13
    Regarding Earnings Season: Most major stocks issue earnings reports
    during earnings season. There are four earnings seasons a year. The
    seasons begin in January, April, July, and October and they each last about
    two months. The reports can make an impact on the stock price. We don’t
    know if the impact is going to be positive or negative (or nothing at all). It’s
    up to you to decide if you want to be in a trade when the earnings report is
    announced. Here’s a link that can help you keep track of the report dates:

    https://www.earningswhispers.com/calendar
    Note: Profit performance displayed in this newsletter does not include commission
    costs.

    This newsletter includes some trading ideas following Chuck Hughes’


    trading strategies along with educational information. For a listing of Chuck’s
    trades, including specific entries and exits, email alerts and real time
    Portfolio Tracking, please call Brad at 1- 866-661-5664 or 310-647-5664 for
    special pricing for subscribers of this newsletter. For a limited time, we are
    offering a $3,000 Scholarship to join Chuck’s Inner Circle Trading Service to
    newsletter subscribers. Use the code NEWSLETTER to obtain this special
    pricing.

    Thank you Thank you for reading! Come back next week for new
    profit opportunities!

    14
    15

    You might also like