Happy Thankful Tuesday!
I am excited to share that you don’t need special education or to sit in front of the computer all day to trade options. It can be easily learned if you are interested in spending an hour or so a week earning money in what could be considered “renting” stocks for a short period of time.
This is why I show you the details about an equity’s symbol and pattern each week.
I am typing this on Sunday. The Dow was down all week.
For the updates on previously discussed symbols, please scroll down.
For today’s Trade of the Day, we will be looking at Advanced Micro Devices (AMD).
Before analyzing AMD’s chart, let’s take a closer look at the company and its services.
Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. The company operates in two segments, Computing and Graphics; and Enterprise, Embedded and Semi-Custom. Its products include x86 microprocessors as an accelerated processing unit, chipsets, discrete and integrated graphics processing units (GPUs), data center and professional GPUs, and development services; and server and embedded processors, and semi-custom System-on-Chip (SoC) products, development services, and technology for game consoles. Advanced Micro Devices, Inc. was founded in 1969 and is headquartered in Santa Clara, California.
Each candle on the chart represents price movement over a 5-day (week) period. The indicator at the bottom of the chart is a Channel Commodity Index (CCI).
A cross down through the CCI zero or -100 line is bearish, in that it is suggesting price has gone from bearish to even more bearish. A cross up through the zero line and a cross through 100, suggests price is bullish. If you want to learn more about the CCI, you can read through the short section below or you can scroll down to the alert signal.
Channel Commodity Index
A cross up and over the CCI -100 or the zero line can issue an entry signal as it moves from being bearish to bullish. A rise toward 100 is a continuation of that bullishness. Up through the 100 line creates a green fin of bullishness, until it drops back down through the 100-line.
A break below the zero line means it has gone from bullish to bearish and a drop below -100 suggests even more bearishness.
The Commodity Channel Index (CCI) is a versatile indicator that can be used to identify a new trend or warn of extreme conditions. Originally, it was developed to identify cyclical turns in commodities, but the indicator can be successfully applied to indices, ETFs, stocks and other securities. In general, CCI measures the current price level relative to an average price level over a given period. CCI is relatively high when prices are far above their average but is relatively low when prices are far below their average. In this manner, CCI can be used to identify overbought and oversold levels or breaks from one level to another.
Check Out How This Pull Back Could Pay Out Big Time
AMD is bearish as it falls past the 0 and further down near the -100 line. This week’s candle is apt to continue its downward movement that could take it lower. We are looking for a continued pull back to $117 before considering entry. The short term target is $110 and then lower.
If you find that you like the CCI Indicator as an easy-to-read indicator, it is included in the 5-Star Academy educational program which includes a chatroom where I am during the day to do live teaching sessions on M-W-F and to answer questions during the day. It is an incredibly supportive community.
Potential Profit Play for AMD
If AMD’s price continues to move up, you could consider a Put trade. I am writing this on Sunday, if price continues to move down $117 when you receive this on Tuesday, you could consider a put option trade. We are expecting the CCI indicator to continue moving to the -100 line.
These examples are listed as an example to show how options work and the advantages they offer.
To buy shares of Advanced Micro Devices (AMD) stock today, it would cost approximately $119 per share. It would be silly to buy stock if you expect the price to go down as we do. Trading options allows you to make money even when the market is going down by buying Puts instead of Calls.
Option trading offers the potential of a lower initial investment and higher percentage gain. It is like renting stock versus buying out right. Let’s take a look.
If you bought one Put option contract covering 100 shares of AMD’s stock with a Feb 18th (Feb22) expiration date for the 110 strike, the premium would be approximately $5.35 per share or a total of $535 for the contract of 100 shares. If price fell the expected $9 over the next few weeks to the $110 target, the premium would likely increase approximately $4.50 to $9.85. This is a gain of 84% profit. That would be a nice trade over a short period of time!
It is exciting to make money if price rises or falls.
I want to remind you that you can sell to close and take profit any time along the line before the expiration date. You don’t have to hold the contract until expiration.
Options often offer a smaller overall investment, covering more shares of stock and potential for greater profits. This is like renting stocks versus having to pay full price to buy.
This said, if you are having any kind of trouble taking advantage of these trades, we don’t want you to miss out. I have put together programs that help traders just like you access the potential profits that options provide. Be sure to check out the programs (like 5-Star Academy mentioned earlier) shared in this email and we will make it easy for you to get your share.
I love to trade, and I love to teach. It is my thing.
Yours for a prosperous future,
PS-I have created this daily letter to help you see the great potential you can realize by trading options. Being able to recognize these set ups are a key first step in generating wealth with options. Once you are in a trade, there is a huge range of tools that can be used to manage the many possibilities that can present themselves. If you are interested in learning how to apply these tools and increase the potential of each trade, click here to learn more.
Previous Trade Candidates:
Last week, we discussed a possible trade on United Airlines. It never reached the $48 entry so there would be no trade.