EXAS Breaking Out to the Upside

Dear Reader,

Yesterday, we looked at a Monthly Price Chart for General Electric Co., noting that the stock’s 1-Month Price is trading above the 10-Month SMA, signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at a Daily Price chart for EXACT Sciences Corp. stock symbol: EXAS.

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

Exact Sciences Corporation provides cancer screening and diagnostic test products in the United States and internationally. The company offers Cologuard, a non-invasive stool-based DNA screening test to detect DNA and hemoglobin biomarkers associated with colorectal cancer and pre-cancer. It also provides Oncotype DX Breast Recurrence Score Test; Oncotype DX Breast DCIS Score Test; Oncotype DX Colon Recurrence Score Test; OncoExTra Test for tumor profiling for patients with advanced, metastatic, refractory, relapsed, or recurrent cancer; and Covid-19 testing services.

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

Buy EXAS Stock

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

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 EXAS stock is 87.50 per share.

Profit if EXAS is Up, Down or Flat

Now, since EXAS stock is currently making a series of higher highs and higher lows and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for an EXAS call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in EXAS stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for EXAS on 5/23/2023 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $310 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if EXAS stock is flat or up at all at expiration the spread will realize a 61.3% return (circled).

And if EXAS stock decreases 7.5% at option expiration, the option spread would make a 56.4% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 61.3% profit potential when the trade was identified*.

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 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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One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, or Netflix for as little as $350. With an option spread you can control 100 shares of Netflix for $350. If you were to purchase 100 shares of Netflix at current prices it would cost about $35,000. With the stock purchase you are risking $35,000 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

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Wishing You the Best in Investing Success,