Dear Reader,

Did you see XRT break through its 52-week high? This is a red hot alert for me. Let’s dive in.

The XRT ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the SP Retail Select Industry Index.

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

Buy Signal Spotted for XRT

The Daily Price chart above shows that the XRT ETF has been hitting new 52-Week Highs regularly over the past week.

Now, since the XRT ETF is making a series of new 52-Week Highs and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for an XRT call option spread.

For this option spread, the calculator analysis below reveals the cost of the spread is $400 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if the XRT ETF is flat or up at all at expiration the spread will realize a 50.0% return (circled). 

And if the XRT ETF decreases 7.5% at option expiration, the option spread would make a 22.3% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 50.0% profit potential when the trade was identified*.

The prices and returns represented below were calculated based on the current ETF and option pricing for XRT on 2/27/2024 before commissions.

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

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