Yesterday, we looked at a Daily Price Chart of Ford Motor Co. noting the stock’s OBV line is sloping down, validating the stock’s recent bearish decline.
For today’s Trade of the Day we will be looking at a Keltner Channel chart for SVB Financial Group stock symbol: SIVB.
Before breaking down SVB’s daily Keltner Channel chart let’s first review which products and services are offered by the company.
SVB Financial Group, a diversified financial services company, offers various banking and financial products and services. It operates through four segments: Global Commercial Bank, SVB Private Bank, SVB Capital, and SVB Securities. The Global Commercial Bank segment provides commercial banking products and services, including credit, treasury management, foreign exchange, trade finance, and other financial products and services.
Now, let’s begin to break down the Keltner Channel chart for SIVB. Below is a Daily Price Chart and the three Keltner Channels for SIVB stock.
Sell SIVB Stock
The Hughes Optioneering Team uses the Keltner Channels as an indicator to determine whether a stock is overbought or oversold. If a stock’s daily stock price is trading below the lower Keltner Channel, this signals that the stock is temporarily oversold and subject to a price rebound.
Even stocks that are in the strongest bearish trends do not decline in a straight line. There are always price rebounds along the way. When a stock becomes oversold, it’s price will typically rebound soon after as the inevitable ‘buying the dip’ occurs.
The SIVB daily price chart shows that the stock is in a strong price downtrend and has become oversold several times. You can see this as SIVB has traded below the Lower Keltner Channel on multiple occasions recently.
But, in every scenario when SIVB became oversold, the stock soon experienced a rebound.
Finding bearish trade opportunities when a stock experiences a price rebound is why the Hughes Optioneering Team uses the Keltner Channels. They help us find a lower-risk entry point.
The Keltner Channel “Sell Zone” occurs when a stock is trading above the Lower Keltner Channel. Once the daily price is trading above the lower channel, it provides a lower-risk buying opportunity for bearish trades as the stock is likely to continue its decline.
Our initial price target for SIVB stock is 405.00 per share.
Profit if SIVB is Down, Up, or Flat
Now, since SIVB stock is trading in the Keltner Channel ‘Sell Zone’ this provides a prime bearish trade opportunity. Let’s use the Hughes Optioneering calculator to look at the potential returns for an SIVB put option spread.
The Put Option Spread Calculator will calculate the profit/loss potential for a put option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 10.0% decrease to a 10.0% increase in SIVB stock at option expiration.
The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is down, up, or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.
The prices and returns represented below were calculated based on the current stock and option pricing for SIVB on 7/19/2022 before commissions.
Built in Profit Potential
For this option spread, the calculator analysis below reveals the cost of the spread is $665 (circled). The maximum risk for an option spread is the cost of the spread.
The analysis reveals that if SIVB stock is flat or down at all at expiration the spread will realize a 50.4% return (circled).
And if SIVB stock increases 10.0% at option expiration, the option spread would make a 50.4% return (circled).
Due to option pricing characteristics, this option spread has a ‘built in’ 50.4% profit potential when the trade was initiated*.
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 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.
Trade High Priced Stocks for $350 With Less Risk
One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, Netflix or Apple for as little as $350. With an option spread you can control 100 shares of Google for $350. If you were to purchase 100 shares of Google at current prices it would cost about $11,300. With the stock purchase you are risking $11,300 but with a Google option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.
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,
Editor, Trade of the Day
Have any questions? Email us at email@example.com
*Trading incurs risk and some people lose money trading.