Dear Reader,

Yesterday, we looked at a Daily Price Chart for Acadia Healthcare Company, Inc., noting that the stock’s 24/52 Day MACD is trading above the 18-Day EMA.

For today’s Trade of the Day we will be looking at a Daily Price chart for Vermillion Energy Inc. stock symbol: VET.

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

Vermilion Energy Inc., together with its subsidiaries, engages in the acquisition, exploration, development, and production of petroleum and natural gas in North America, Europe, and Australia. 

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

Buy VET Stock

The Daily Price chart above shows that VET stock began reaching a series of higher highs and higher lows since late July.

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 VET stock is 31.00 per share.

Profit if VET Is Down 10%

Now, since VET stock is currently making a series of higher highs and higher lows and will likely rally from here, let’s use the Optioneering calculator to look at the potential returns for a VET covered call trade. Covered calls are also known as buy writes.

The Buy Write Calculator will calculate the profit/loss potential for a covered call trade based on the price change of the underlying stock/ETF at option expiration in this example from a 10.0% increase to a 10.0% decrease in VET stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for covered calls and the ability of covered calls 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 price used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for VET on 8/24/2022 before commissions.

Built in Profit Potential

For this covered call, the calculator analysis below reveals the cost or the breakeven price is $1,886.00 (circled). The maximum risk for a covered call is the cost of the covered call.

The analysis reveals that if VET is flat at 28.66 or up at all at expiration the covered call will realize a $614.00 profit and a 32.6% return (circled). 

If VET decreases 5.0% at option expiration, the covered call will realize a $614.00 profit and a 32.6% return. 

And if VET decreases 10.0% at option expiration, the covered call will realize a $614.00 profit and a 32.6% return. 

Due to option pricing characteristics, this covered call has a ‘built in’ 32.6% profit potential when the trade was identified*.

Covered call trades can result in a higher percentage of winning trades compared to a directional stock 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 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.

Get Trade Insights Directly From Chuck

You can start getting market insights directly from 10-Time Trading Champion Chuck Hughes.

See what he’s trading and when with his exclusive Inner Circle Trading Service where he will send you his hand-picked stock and option trades.

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,

Chuck Hughes

Editor, Trade of the Day

Have any questions? Email us at dailytrade@chuckstod.com

*Trading incurs risk and some people lose money trading.