June 8th, 2022

Dear Reader,

Yesterday, we looked at a Daily Price Chart for the Amplify Online Retail ETF, noting that the ETF’s OBV line is sloping down validating the recent bearish trend.

For today’s Trade of the Day we will be looking at a Daily Price chart for Phillips 66 stock symbol: PSX.

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

Phillips 66 operates as an energy manufacturing and logistics company. It operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment transports crude oil and other feedstocks; delivers refined petroleum products to market; provides terminaling and storage services for crude oil and refined petroleum products; transports, stores, fractionates, exports, and markets natural gas liquids; provides other fee-based processing services; and gathers, processes, transports, and markets natural gas. 

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

Buy PSX Stock

The Daily Price chart above shows that PSX 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 PSX stock is 117.00 per share.

82.8% Profit Potential for PSX Option

Now, since PSX stock is currently making a series of higher highs and higher lows this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a PSX 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 PSX 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 PSX option example, we used the 1% Rule to select the PSX 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 a PSX in-the-money option strike price, PSX 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 PSX stock is flat at 108.95 at option expiration, it will only result in a 4.4% loss for the PSX 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 PSX on 6/7/2022 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 PSX stock increases 5.0% at option expiration to 114.40 (circled), the call option would make 39.2% before commission.

If PSX stock increases 10.0% at option expiration to 119.85 (circled), the call option would make 82.8% before commission and outperform the stock return more than 8 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 winning trades 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.

Average Portfolio Return of 194.7%

Below is a screenshot of the current open trade profit opportunities from Chuck’s Weekly Option Alert Trading Service. There are currently $312,686.70 in open trade profit opportunities with an average portfolio return of 194.7% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios.

Get Chuck’s Trades Sent to You!

Do you want to start receiving hand-picked trades from 10-Time Trading Champion, Chuck Hughes?

As a Trade of the Day subscriber, Chuck is offering you a special discount on his Weekly Option Alert Trading Service.

Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join and use the code “Optioneering VIP” to receive special pricing!

You can also 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