When I am looking for a great trade that has the potential to really explode in the direction, I want it to, I have a favorite indicator that I rely on. Here is an example of a trade that this reliable signal provider helped me uncover in today’s market.
Union Pacific Corp. symbol (UNP) caught my eye when I looked at the Commodity Channel Index (CCI) on the bottom of the chart. The areas on the CCI that look like fins are what caught my attention. To learn more about CCI, click here. Take a look and I will explain how this example can work below:
On the CCI indicator below the UNP chart, notice how the line crossed down and is heading below 0 which is bearish territory. This signals bearish moves with the thought that price may move down.
We want CCI on UNP to go down to create a fin shape. We also want the price to go down to at least $211 before entering a trade. The first target would be $205.
Here Is How This Could Be Lucrative in This Example
To buy stock shares of UNP today, price would be approximately $211.61. You would wait until it found a bottom before placing a trade.
That said, option trading offers the potential of a smaller initial investment and higher percentage gain even when price is expected to rise or fall. Let’s take a look.
If you bought one Put option contract covering 100 shares of UNP’s stock with an October 20th expiration date for the 205 strike, premium would be approximately $2.80 today, or a total of $280 per contract. If the stock price fell the expected $6 the premium might increase approximately $3.00 to $5.80 per share on your 100-share contract. This is a 107% gain over a couple of weeks.
Remember you can close an option trade anywhere along the line before expiration to take gains or stop a loss.
If you are interested in getting my guide to spotting this “fins” just click here.
I have created this daily letter to help you see the great potential you can realize by trading options. Being able to recognize these set ups is a key first step in generating wealth with options. Once you are in a trade, there is a huge range of tools that can be used to manage the many possibilities that can present themselves throughout the trade to earn and take profit or prevent a loss. Lots of fun things to learn and fine-tune.
I wish you the very best,
Past potential trade update:
Last week we discussed buying DOCU calls. It did not reach our target entry price.