Industrial Bulls Elevate OTIS Shares

Dear Reader,

On Friday, we looked at a Daily Price Chart of Textron, Inc., noting that TXT has been making a series of new 52-Week Highs recently.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Otis Worldwide Corp. stock symbol: OTIS.

Before breaking down OTIS’s monthly chart let’s first review what products and services the company offers.

Otis Worldwide Corp. is one of the leading elevator and escalator manufacturing, installation and service provider to commercial, housing associations, government associations, etc. Otis has expanded business in multiple countries across the world in more than 1,400 branches and offices.

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Now, let’s begin to break down the monthly chart for OTIS stock.

Below is a 10-Month Simple Moving Average chart for Otis Worldwide Corp.

Buy OTIS Stock

As the chart shows, in November, the OTIS 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for OTIS stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend.

Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play!

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for OTIS is 100.00 per share.

107.6% Profit Potential for OTIS Option

Now, since OTIS’s 1-Month Price is trading above the 10-Month SMA this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an OTIS 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 OTIS 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 OTIS option example, we used the 1% Rule to select the OTIS 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 an OTIS in-the-money option strike price, OTIS 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 OTIS stock is flat at 96.06 at option expiration, it will only result in a 2.2% loss for the OTIS 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 OTIS on 3/11/2024 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 OTIS stock increases 5.0% at option expiration to 100.86 (circled), the call option would make 52.7% before commission.

If OTIS stock increases 10.0% at option expiration to 105.67 (circled), the call option would make 107.6% 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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Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join or CLICK HERE to schedule a call!

Wishing You the Best in Investing Success,