Happy Fabulous Friday!
I teach everyday people (like me) to trade options. I do my best to write in an understandable way as if we are talking over the kitchen table.
The market was up 4 out of 5 days last week. I am typing this on Wednesday, and you won’t get this until Friday. A lot can change in a couple days.
For today’s Trade of the Day, we will be looking at Bristol-Myers Squibb Company (BMY). Keep reading and we will explain a trade with a potential 263% return.
Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, and markets biopharmaceutical products worldwide. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and covid-19 diseases. The company was formerly known as Bristol-Myers Company. The company was founded in 1887 and is headquartered in New York, New York.
Let’s look at BMY’s weekly chart.
The ADX +DI (green line) is above the -DI and the black ADX line is curling up. As long as the +DI is above the -DI, price should rise. If you want to learn more about ADX, read on or, if not, scroll down to the alert.
Average Direction Index (ADX) – Strength Indicator
The Average Directional Index consists of 3 lines: Green, Red and Black.
Green = +DI (Bullish)
Red = -DI (Bearish)
Black = ADX Strength Line
The DI line that is on top is in control. If the ADX line is heading up, strength is supporting the DI line that is on top and in control.
Each candle on the chart represents price movement over a 5-day (week) period; therefore, it takes weeks for trades to play out. When the -DI crosses over the +DI line, it gives a buy signal for Puts as the -DI line (red) appears as if it is in control and rising to head up on the ADX indicator, and as the ADX turns up that is even more bearish, suggesting a downward move is gaining strength. When the +DI (green line) crosses the red and the black line points up it shows an upward trend and Calls can be considered.
BMY’s Potential Trade – Showing Strength
This signal could give a quick payout if it continues its upward move, and the strength of this pattern continues. I am typing this on Wednesday and BMY costs about $71. If BMY’s price moves above $72 and the + DI (green line) is above the -DI with the black line heading up you could consider a Call trade. The short-term price target for BMY is $75 and then, perhaps, higher. With the swings in past months, I am suggesting small profit targets until a market trend starts again.
Option trading offers the potential of a lower initial investment and higher percentage gain. Let’s take a look and make a comparison.
If you bought 10 shares of BMY it would cost about $710. If price hit the expected $75 target that would be a $40 profit. That is not much profit on a $710 investment.
If you bought 1 Call option covering 100 shares of BMY with a April 14th expiration date for the 72 strike the premium would be approximately $.76 today or $76 for 1 option. If price rose to $75 over the next few weeks, the premium would likely increase $2.00 giving $200 profit on your $76 investment, this is a 263% gain.
Trading options is a win, win, win opportunity. Options often offer a smaller overall investment, covering more shares of stock and potential for greater profits.
I like to stress when trading options, you don’t need to wait for the expiration date to close the trade. You can close anywhere along the way prior to the expiration date. It is never a bad idea to take profit.
Trading options is like renting stocks for a fixed period of time. The potential to generate steady income with options is real and it can be transforming. Watch this video to learn how you can use option trading to achieve financial freedom. click here
Yours for a prosperous future,
Past Equity Candidates:
Two weeks ago we looked at buying MU April 14th 67.50 Puts. On 3/11 the premium was $3.35. On 3/14 you could have sold for $4.40.
Last week we discussed buying WYNN April 14th 60 Puts. The price never went down to the $72 target entry so no trade would be taken.