Today I am going to walk you through a great potential trade. Not only will we look at which ticker is setting up, I will layout the amazing indicator that helped me spot this one and many others.
In this example chart of Broadcom Inc. (AVGO), the 10-Month Simple Moving Average is showing us what we need to know. It is a very powerful tool for spotting a significant trend in a stock. With that info, we can build a trade that fits right into our trading plan.
Grab AVGO On This Move
The signal that we spotted is where AVGO’s 1-month price crosses the 10-Month Simple Moving Average. This shows strong upside momentum that is still in play. To get more details on the 10-Month Simple Moving Average click here.
Up, Down, or Flat – This Trade Can Still Profit
We have used the Hughes Optioneering Calculator to look at the potential returns for a Call Option Spread. It figures out the profit/loss for this type of trade based on a 7.5% increase to a 7.5% decrease in underlying asset price at option expiration.
For this option spread, the calculator analysis below reveals the cost of the spread is $630 (circled). The maximum risk for an option spread is the cost of the spread. (When you are a member, this amazing tool even includes the option strike prices)
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.
Can Profit If AVGO Moves in Any Direction
The analysis reveals that if AVGO is flat or up at all at expiration the spread will realize a 58.7% return (circled).
And if AVGO decreases 10.0% at option expiration, the option spread would make a 52.1% return (circled).
Due to option pricing characteristics, this option spread has a ‘built in’ 58.7% profit potential when the trade was initiated*.
Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.
A higher percentage of winning trades can give you the discipline needed to become a successful trader.
The Hughes Optioneering Team is here to help you identify winning trades just like this one.
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Members will receive hand-picked options trades from the 10-Time Trading Champion, Chuck Hughes.
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Wishing You the Best in Investing Success,
Editor, Trade of the Day
Have any questions? Email us at firstname.lastname@example.org
*Trading incurs risk and some people lose money trading.