Dear Fellow Trader:
Happy Momentum Monday!
Monday’s positive saying, repeat it several times throughout the day:
“You can add up your blessings or add up your troubles. Either way, you’ll find you have an abundance.”― Richelle E. Goodrich
My joy comes from teaching everyday people to earn money trading options. It isn’t hard. I explain in easy-to-understand terms when I teach or write a book—like we are comfortably sitting on a deck, discussing the details.
Market Snapshot
Major stock market indexes remained near the highs of the day in afternoon trading Monday. The Dow Jones Industrial Average improved from morning lows. The Dow pared losses to less than 0.1% while the S&P 500 climbed 0.7%. The Nasdaq showed more strength and rallied 1.6% in the stock market today. The small-cap Russell 2000 advanced 1.3%.
Volume fell on the New York Stock Exchange and rose on the Nasdaq vs. the same time on Friday. The 10-year Treasury yield shed 5 basis points to 3.99%.
NIke Move Means Profits
For today’s Trade of the Day, we will be looking at Nike – symbol (NKE).
Before analyzing NKE’s chart, let’s take a closer look at the stock and its services.
Nike markets high-quality athletic footwear, apparel, equipment and accessories on a worldwide basis.
The chart of NKE below is a weekly chart with a CCI indicator at the bottom. The description coming up next explains how to use the CCI.
Channel Commodity Index
Stockcharts.com provides a great definition of the Commodity Channel Index (CCI), which is a versatile indicator that can be used to identify a new trend or warn of extreme conditions. Originally, it was developed to identify cyclical turns in commodities, but the indicator can be successfully applied to indices, ETFs, stocks and other securities. In general, CCI measures the current price level relative to an average price level over a given period.
CCI is relatively high when prices are far above their average but is relatively low when prices are far below their average. In this manner, CCI can be used to identify overbought and oversold levels or breaks from one level to another.
A move down to the CCI -100 or the zero line can issue a Put entry signal as it moves from being bullish to bearish. A move toward -100 is a continuation of that bearishness. Up through the 100 line creates a green fin of bullishness until it drops back down through the -100 line.
A break below the zero line means it has gone from bullish to bearish and a drop below -100 suggests even more bearishness.
On the CCI indicator below the NKE chart, notice how the line crossed down and is passed the 0 which is bearish territory. This signals bearish moves with the thought that price may move down.
NKE’s Potential Trade
We want CCI on to go up to create a fin shape. We also want the price to go below $102 before entering a trade. The first target would be $95.
Reminder: We have been using weekly charts to smooth out the current volatility of the market and to provide you time to consider your trade.
Check Out How an Option Trade Could Pay Out Big Time
To buy stock shares of NKE today, price would be approximately $102.64. You would wait until price found a bottom before buying stock.
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 NKE’s stock with a Feb 16th expiration date for the 100 strike, premium would be approximately $1.65 today, or a total of $165 per contract. If the stock price fell the expected $7 the premium might increase approximately $3.50 to $5.15 per share on your 100-share contract. This is a 212% gain over a couple of weeks.
For updates on previous potential trades we have discussed, scroll to the bottom of this message.
Remember you can close an option trade anywhere along the line before expiration to take gains or stop a loss.
Options can offer a win, win, win trade opportunity. They often offer a smaller overall investment, covering more shares of stock, and potentially offer greater profits.
If you are having any kind of trouble taking advantage of these trades, I don’t want you to miss out. I have put together educational programs that help traders just like you access the potential profits that options provide. I write like we are having a conversation, so the information is easy to understand and apply. Be sure to check out the programs on our website, Love Your Options, (https://loveyouroptions.com/), and we will make it easy for you to learn how to get your share. Look under Virtual Academy and then Tutorials.
I love to trade, and I love to teach. It is my thing.
I wish you the very best,
Wendy
PS – 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 are 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.
Past potential trade update:
Last week we discussed buying DIS calls. On 1-3 the Feb 16th 90 Put was $3.05. On 1-4 the premium was 4.00, a 31% profit.