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New Income trade for 130% Annualized Return

Income Opportunity for 130% Option Trade
As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums.  This has been successful for our investors for years.  Option selling offers another method to diversify investing strategies beyond traditional dividend investing.  We have combined technical stock events with our strategy to identify high returns option selling opportunities. This income trade will generate a return of more than 130% annualized.
 
Stock:  Zumiez (ZUMZ) is a leading specialty retailer of apparel, footwear, accessories and hardgoods for young men and women who want to express their individuality through the fashion, music, art and culture of action sports, streetwear, and other unique lifestyles. As of October 28, 2017 it operated 694 stores, including 604 in the United States, 51 in Canada, and 32 in Europe and 7 in Australia. ZUMZ operates under the names Zumiez, Blue Tomato and Fast Times.
ZUMZ announced that total net sales for the four-week period ended October 28, 2017 increased 10.0% to $61.5 million, compared to $55.9 million for the four-week period ended October 29, 2016. The Company’s comparable sales increased 6.6% for the four-week period compared to a comparable sales increase of 10.2% in the year ago period.
 
Earnings Per Share (EPS) was up 49% compared to the same quarter in the prior year. This tells us the company increased earnings and/or decreased the number of shares.
Return on Equity (ROE) is 8.01% for the latest twelve months. This reflects how efficient the company has been at turning a profit on the money shareholders have invested.
Chart: We have detected a “Symmetrical Continuation Triangle (Bullish)” chart pattern formed on ZUMZ. The stock’s price has broken upward to confirm a classic chart pattern, offering a target price for the intermediate-term in the range of 21.00 to 21.70 for a 19% price increase
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Income Trade Opportunity in Nexstar Media

We have a new option trade for monthly income to share with subscribers. I have decided to take early profits on the CF trade as it moved above my $30 target price today for a great income in only 10 days. I will take early profits so I can continue to compound my capital be entering new trades.

As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums. This has been successful for our investors for years. Option selling offers another method to diversify investing strategies beyond traditional dividend investing. We have combined technical stock events with our strategy to identify high returns option selling opportunities. This income trade will generate a return of 5.8% using the forward month options.

Stock: Nexstar Media Group, Inc. (NXST) operates as a television broadcasting and digital media company in the United States. It focuses on the acquisition, development, and operation of television stations and interactive community Websites in medium-sized markets. The company will report earnings on August 8.

A “Symmetrical Continuation Triangle (Bullish)” chart pattern formed on Nexstar Media Group Inc (NXST). This bullish signal indicates that the price may rise from the close of 61.75 to the range of 73.00 – 76.00. The pattern formed over 55 days which is roughly the period of time in which the target price range may be achieved.

A Symmetrical Continuation Triangle (Bullish) is considered a bullish signal, indicating that the current uptrend may continue. The formation occurs because prices are reaching both lower highs and higher lows. The technical event occurs when the price breaks out of the triangle formation to close above the upper (descending) trendline, thereby confirming the pattern.

The RSI is above 50. The PMO is above its signal line and positive. The PMO is breaking above its zero level to indicate further upside. Moreover, the stock is above its 20 and 50 day MA (respectively at 60.04 and 59.91).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strategy: We want to sell a covered call on NXST using the August 2017 65 Call. For each 100 shares of NXST stock you buy, sell one August 65 covered call option for a $61.45 ($63.25 – $1.80) debit or better. That’s potentially a 5.8% assigned return with a 3.0% downside protection. If you want more downside protection, you can purchase an August 60 PUT for less than $0.25 per option.

For PUT writers wanting to lower their cost of entering this position. You can sell a August 65 PUT option for $3.70. That’s a potential return of return of 6.0%.

Investors should consider taking profits early as the stock price moves higher toward the $65 option strike price and exit if there is a pull back below support levels. You can use the PCD strategy if you want to use this stock for Monthly Income.

This is a higher risk trade than we normally place in the Monthly Income Report. However, this is a nice setup with a positive merger announcement, positive technical confirmation and increased premium from selling options for income.

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Calendar Spread Trade on Noble Corp (NE)

A CALENDAR SPREAD that involves selling the January ’12 37 call and buying the January  ’13 33 call should cost $32.59 less per share than the covered call and potentially yield a 100% return if the stock stays above $37 through expiration

TRADE:  Noble (NYSE: NE) ended the last trading session at $37.79.  So far the stock has hit a 52-week low of $27.33 and 52-week high of $46.72.  NE has had an S&P 4 STARS (out of 5) ranking since 6/8/2010.  On 7/21/2011 S&P equity analysts set a 12-Month price target of $47.00 for the stock.   Noble stock has been showing support around $36.76 and resistance in the $38.52 range.  NE is part of the S&P 4 STARS stock list.  One way to play this stock would be with a calendar spread that substitutes a longer term call option in place of the covered call stock purchase.  To use this strategy consider going long the NE Jan ’13 33 Call and selling the Jan ’12 37 call for a $2.00 debit.  The strategy has a 75 day life and would provide 7.38% downside protection and a 100.00% assigned return rate for a 486.67% annualized return rate (for comparison purposes only).

RISK: The Calendar spread strategy will normally carry more risk than a covered call strategy, but the rate of return is generally higher, since there is a lower capital outlay.  At a 3 Key risk ranking this strategy is considered to have moderate relative risk.  If the stock price at expiration is below $37 this strategy will not generate the potential returns shown. Another risk for this strategy is related to the bought Call Option price.   If the stock drops in price between now and
expiration date, there is a possibility that the Jan ’13 33.00 call could drop quickly.

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