Optioneering Newsletter

Optioneering Newsletter
October 9, 2016
The Dow Monthly
The monthly trend is up and the long-term outlook is bullish. However,
there are always corrections along the way. The little pullback that has
occurred recently is expected to yield to a further advance.
The first profit opportunity we will consider is NVDA, or NVIDIA
Corporation. NVDIA designs graphic processing units (GPUs) for the
gaming market, as well as system on chip (SOCs) for the mobile computing
and automotive markets.
NVDA Monthly
The monthly chart shows that NVDA has been going straight up since this
year’s low and there are no signs of a top.
NVDA Daily
The daily chart for this year is incredibly bullish. This chart is very bullish,
but it only depicts about half of the NVDA stock price increase for 2016.
The uptrend has been very strong. This week’s little pullback gives us a
buying opportunity.
We are going to review a Call Debit Spread for NVDA.
Traders who want to employ a more leveraged approach can buy NVDA
calls. NVDA has options expiring every week until November 25th. After
that, NVDA has options expiring in December, January, March, and
January 2018.
Buy to Open NVDA November 18th expiration 55-strike Call
Sell to Open NVDA November 18th expiration 65-strike Call
We can see from the Call Option Spread Analysis Calculator that if the
NVDA stock price declines by -2.5%, stays the same as it is now, or
increases in price at all when the options expire, the spread will show a
profit of 32.5% or $245. If the NVDA price is down -5% at expiration, the
spread will make a 12.7% or $96 profit. If NVDA is down -7.5% when the
options expire, the spread will lose -9.5% or -$71.
The next profit opportunity we will review is in WDAY, or Workday, Inc.
Workday is a cloud based financial management and human resource
management software company.
WDAY Monthly
The monthly chart shows that WDAY went straight up after it began trading
in 2012. The decline from the 2014 high resulted in a cut in half in the stock
price. This year’s trading suggests that the deep pullback is over and the
uptrend is resuming.
WDAY Daily
The daily chart shows that WDAY has been very bullish since the summer
low. A look at the whole year gives an even stronger picture. The current
pause gives us a buying opportunity.
We are going to review a Call Debit Spread for WDAY.
Traders who want to employ a more leveraged approach can buy WDAY
calls. WDAY has options expiring every week until November 25th. After
that, WDAY has options expiring in December, January, March, and
January 2018.
Buy to Open WDAY December 16th expiration 77.50-Strike Call
Sell to Open WDAY December 16th expiration 87.50-Strike Call
We can see from the Call Option Spread Analysis Calculator that if the
WDAY stock price declines by -2.5%, stays the same as it is now, or
increases in price at all when the options expire, the spread will show a
profit of 42.9% or $300. If the WDAY price is down -5% at expiration, the
spread will make a 28.4% or $199 profit. If WDAY is down -7.5% when the
options expire, the spread will lose -4.1% or -$29.
The next profit opportunity we will review is in ISRG, or Intuitive Surgical,
Inc. Intuitive Surgical is an American corporation that manufactures robotic
surgical systems, most notably the da Vinci Surgical System. ISRG has
engineered cutting edge technological innovations across cardiac, thoracic,
urology, gynecologic, colorectal, pediatric and general surgical disciplines.
ISRG Monthly
The monthly chart shows that the ISRG stock price rose from below $100
in 2009 to almost $600 in 2012. After that, ISRG had two big dips in 2013
and 2014. It’s been heading higher since then. ISRG has been especially
strong since the August 2015 low, and there are no signs of a top.
ISRG Daily
The daily chart depicts a very strong bull trend. The current rally suggests
that the two-month period of sideways trading is over and the uptrend is
resuming. This week’s pause gives us a buying opportunity.
We are going to review a Call Debit Spread for ISRG.
Traders who want to employ a more leveraged approach can buy ISRG
calls. ISRG has options expiring every week until November 25th. After that,
ISRG has options expiring in January, April, January 2018, and January
2019.
Buy to Open ISRG January 20th expiration 640-strike Call
Sell to Open ISRG January 20th expiration 670-strike Call
We can see from the Call Option Spread Analysis Calculator that if the
ISRG stock price declines by -5%, stays where it is, or increases at all
when the options expire, the spread will make a 27.7%, or $650 profit. If the
ISRG stock price is down -7.5% when the options expire, the spread will
make 2.9% or $69.
The last profit opportunity we will review is in MTD, or Mettler-Toledo
International. Mettler-Toledo is a multinational manufacturer of scales and
analytical instruments. It is the largest provider of weighing instruments for
use in laboratory, industrial, and food retailing applications.
MTD Monthly
The monthly chart shows that MTD has been in a very strong bull trend
since 2009. MTD just hit a new all-time high on September 30th.
MTD Daily
The daily chart shows that MTD has been very bullish since this year’s low.
The current stock price is inside the Keltner Channel, or inside the Buy
Zone.
We are going to review a Call Debit Spread for MTD.
Traders who want a more leveraged approach could consider buying MTD
calls. MTD has options expiring in October, November, January, and April.
Buy to Open MTD January 20th expiration 370-strike Call
Sell to Open MTD January 20th expiration 390-strike Call
We can see from the Call Option Spread Analysis Calculator that if the
MTD stock price declines by 5%, stays where it is, or increases at all when
the options expire, the spread will make a 27%, or $425 profit. If the MTD
stock price is down -7.5% when the options expire, the spread will lose
-0.2% or -$2.
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 earnings
reports can have 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 for a page 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 transaction
costs.
This newsletter includes some trading ideas following Chuck Hughes’ trading
strategies along with educational information. For a complete listing of Chuck’s
exact trades, including specific entries and exits and real time Portfolio tracking,
please call Brad at 1- 866-661-5664 or 310-647-5664