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.
Zoom Video Communications Inc symbol (ZM) 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 ZM chart, notice how the line crossed up and is heading toward the 0 which is bullish territory. This signals bullish moves with the thought that price may move up.
We want CCI on ZM to go up to create a fin shape. We also want the price to go up to at least $72 before entering a trade. The first target would be $78.
Here Is How This Could Be Lucrative in This Example
To buy stock shares of ZM today, price would be approximately $71.41. If the price went to $78 you would make about $6.59 per share.
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 Call option contract covering 100 shares of ZM’s stock with a June 16th expiration date for the 78 strike, premium would be approximately $2.77 today, or a total of $277 per contract. If the stock price rose the expected $6 the premium might increase approximately $3.00 to $5.77 per share on your 100-share contract. This is a 108% gain over a couple 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 JD calls. It did not reach our target entry price. No trade would be taken.