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.
In fact, I am going to be sitting down in a webinar next Wednesday to walk through my top two trading approaches and taking questions. If you want to get a detailed explanation of how these programs changed my life and did the same for many others, you can grab your spot here.
I am typing this on Saturday. Last week, the Dow was up 4 days out of 5. There was a large rise throughout the week, so that the market recovered much of the previous week’s losses. It appears as if it will continue to rise and perhaps, eventually flatten out.
For the updates on previously discussed symbols, please scroll down.
For today’s Trade of the Day, we will be looking at United Health Group (UNH).
Before analyzing UNH’s chart, let’s take a closer look at the company and its services.
UnitedHealth Group Incorporated operates as a diversified health care company in the United States. It operates through four segments UnitedHealth Group Incorporated has partnership with the University of California, San Francisco to expand the mental health workforce in California.
UnitedHealth Group Incorporated was incorporated in 1977 and is based in Minnetonka, Minnesota.
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).
I drew a line below the candles, if price stays above that line, the upward trend should continue. Watch for a continued rise toward its target.
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.
Also, a pullback and then, as it heads back up is another bullish indicator.
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 Rise in Price Could Pay Out Big Time
UNH is bullish as it rises further up above the 100 line after a brief pullback. This week’s candle is apt to continue its upward movement that could take it higher. We are looking for a continued rise above $479 before considering entry and then higher. The target is $485 and then higher.
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 UNH
If UNH’s price continues to move up, you could consider a Call trade. I am writing this on Sunday, if price continues to rise above 479 when you receive this on Tuesday, you could consider a call option trade. We are expecting the CCI indicator to continue rising further above the 100 line.
Price is currently at approximately $479 as I write over the weekend and is expected to continue heading up to perhaps, hit the target of $485 and then higher.
If price doesn’t stay above $479, don’t consider a trade.
These examples are listed as an example to show how options work and the advantages they offer.
If the CCI line stays above the 100 line and then, continues up, price will continue its current uptrend and continue to rise. We will keep an eye on it over the course of the next few weeks.
The short-term price target for UNH is $479 and, perhaps, higher.
To buy shares of United Health Care (UNH) stock today, it would cost approximately $479 per share.
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 1 share of UNH at $479 total investment $479 and it increased in price to $485, it would result in a profit of $6 for 1 share or an 1.2% gain.
If you bought one Call option contract covering 100 shares of UNH’s stock with a Dec 31 (Dec Qtr21) expiration date for the 485 strike, the premium would be approximately $6.50 per share or a total of $650 for the contract of 100 shares. If price increased the expected $6 over the next few weeks to $485 target, the premium would increase approximately $4 to $10.50. This is a gain of $400 or 62% 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 Equities discuss:
Last week, we discussed AMAT with a Dec 17th (Dec 21) expiration for a strike of 160 and a premium of .97. By Thursday, premium 2.33 and then started pulling back. If it were closed on Thursday that is a gain of 140% gain in a few days. With the pullback it is now at .68. It has a week until expiration, but now time decay will escalate offsetting some of the potential gains.