Bullish Run for PBT Shares

Dear Reader,

Yesterday, we looked at a Daily Price Chart for Deere & Co., noting that the stock’s 50-Day EMA is trading above the 100-Day EMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at a Daily Price chart for Permian Basin Royalty Trust, stock symbol: PBT.

Before breaking down PBT’s daily price chart let’s first review which products and services are offered by the company.

Permian Basin Royalty Trust, an express trust, holds overriding royalty interests in various oil and gas properties in the United States. The company owns a 75% net overriding royalty interest in the Waddell Ranch properties comprising Dune, Judkins, McKnight, Tubb, Devonian, and Waddell fields located in Crane County, Texas. As of December 31, 2021, the Waddell Ranch properties contained 268 net productive oil wells, 38 net productive gas wells, and 50 net injection wells.

Now, let’s begin to break down the Daily Price chart for PBT. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

Buy PBT Stock

The Daily Price chart above shows that PBT stock began reaching a series of higher highs and higher lows since early December.

This pattern of bullish trading suggests the stock will march on to a further advance.

You see, after a stock makes a series of two or more higher highs and higher lows, the stock typically continues its price up trend and should be purchased.

Our initial price target for PBT stock is 26.50 per share.

102.3% Profit Potential for PBT Option

Now, since PBT stock is currently making a series of higher highs and higher lows this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a PBT call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat PBT price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following PBT option example, we used the 1% Rule to select the PBT option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a PBT in-the-money option strike price, PBT stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if PBT stock is flat at 24.50 at option expiration, it will only result in a 9.1% loss for the PBT option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for PBT on 12/23/2022 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if PBT stock increases 5.0% at option expiration to 25.73 (circled), the call option would make 46.6% before commission.

If PBT stock increases 10.0% at option expiration to 26.95 (circled), the call option would make 102.3% before commission and outperform the stock return more than 10 to 1*.

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

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Wishing You the Best in Investing Success,