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.

Today we will be looking at a Daily Price chart for Installed Building Products Inc. (IBP). Installed Building Products, Inc., together with its subsidiaries, engages in the installation of insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors, and other products in the United States. It operates through Installation, Distribution, and Manufacturing operation segments. 

Take a look at the chart below.

Buy Signal for IBP

The Daily Price chart above shows that IBP stock began reaching a series of higher highs and higher lows since mid-January.

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

Now, since IBP stock is 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 IBP call option spread.

The analysis reveals that if IBP stock is flat or up at all at expiration the spread will realize a 55.0% return (circled). 

And if IBP stock decreases 7.5% at option expiration, the option spread would make a 55.0% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 55.0% profit potential when the trade was identified*.

The prices and returns represented below were calculated based on the current stock and option pricing for IBP on 3/26/2024 before commissions.

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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.

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Wishing You the Best in Investing Success,

Chuck Hughes

Editor, Trade of the Day