Happy Fabulous Friday!
I teach everyday people (like me) to trade options. I do my best to write in an understandable way as if we are talking over the kitchen table.
The market was down 3 out of 5 days last week. I am typing this on Wednesday, and you won’t get this until Friday. A lot can change in a couple days.
Travel is making a big comeback and now is the time to get in on it. I have outlined a great potential trade below so read on.
For today’s Trade of the Day, we will be looking at Airbnb Inc. (ABNB).
Airbnb, Inc., together with its subsidiaries, operates a platform for stays and experiences to guests worldwide. The company’s marketplace model connects hosts and guests online or through mobile devices to book spaces and experiences. It primarily offers private rooms and luxury villas. The company was formerly known as AirBed & Breakfast, Inc. and changed its name to Airbnb, Inc. in November 2010. Airbnb, Inc. was founded in 2007 and is headquartered in San Francisco, California.
Let’s look at ABNB’s weekly chart. The ADX +DI (green line) is above the -DI and the black ADX line is heading up. As long as the +DI is above the -DI, price should rise. Green above red is an indication of strength. If you want to learn more about ADX, read on or, if not, scroll down to the alert.
Average Direction Index (ADX) – Strength Indicator
The Average Directional Index consists of 3 lines: Green, Red and Black.
Green = +DI (Bullish)
Red = -DI (Bearish)
Black = ADX Strength Line
The DI line that is on top is in control. If the ADX line is heading up, strength is supporting the DI line that is on top and in control.
Each candle on the chart represents price movement over a 5-day (week) period; therefore, it takes weeks for trades to play out. On the chart, the week is a bullish candle as I type. When the +DI crosses over the -DI line, it gives a buy signal for Calls as the +DI line (green) appears as if it is in control and rising to head up on the ADX indicator, and as the ADX turns up that is even more bullish, suggesting an upward move is gaining strength. When the -DI (red line) crosses the green and the black line points up it shows a downward trend and Puts can be considered.
ABNB Potential Trade – Showing Strength
This signal could give a quick payout if it continues its upward move, and the strength of this pattern continues. I am typing this on Wednesday and ABNB costs about $186. If ABNB’s price moves above $188 and the + DI (green line) is above the -DI with the black line heading up you could consider a Call trade. The short-term price target for ABNB is $192 and then, perhaps, higher. With the swings in past months, I am suggesting small profit targets until a market trend starts again.
Option trading offers the potential of a lower initial investment and higher percentage gain. Let’s take a look and make a comparison.
It would cost about $186 to buy a share of ABNB. If price went up to the expected $192 you would make a profit of $6. That isn’t much of a profit.
If you bought 1 Call option covering 100 shares of ABNB with a March 18th expiration date for the 195 strike the premium would be approximately $6.90 today or $690 for 1 option. If price rose to $192 over the next few weeks, the premium would likely increase $3.00 giving $300 profit on your $690 investment, this is a 43% gain.
Trading options is a win, win, win opportunity. Options often offer a smaller overall investment, covering more shares of stock and potential for greater profits.
I like to stress when trading options, you don’t need to wait for the expiration date to close the trade. You can close anywhere along the way prior to the expiration date. It is never a bad idea to take profit.
Trading options is like renting stocks for a fixed period of time. The potential to generate steady income with options is real and it can be transforming. Watch this video to learn how you can use option trading to achieve financial freedom. click here
Yours for a prosperous future,
Past Equity Candidates:
Last Friday we looked at buying LVS March 18th 49 Calls. On 2/11 the premium would have been $5.10. As of today (Wednesday) the premium is $3.30. The pattern still looks bullish so we will continue to follow this trade.