This week we are featuring another of the Investor’s Business Daily (IBD) Top 50 List companies. We use this list in one of our portfolios to identify stocks with upward momentum and place spreads that stand to profit if the momentum continues, at least a little.
Just an update – the composite average gain for our 10 Terry’s Tips actual options portfolios has now reached 102% for 2017 (after paying all commissions, of course), and we expect some fireworks this week in our two portfolios which trade FB and MA options as both companies announce earnings after the close on Wednesday.
Centene Corp (CNC) Poised To Break $100
Several analysts are confident Centene Corp stock will continue its bullish run and break above the psychological $100.00 handle. Here are two of them – Oppenheimer Holdings, Inc. Reaffirms “Buy” Rating for Centene Corporation (CNC) and Centene Corporation’s (CNC) Buy Rating Reiterated at Cowen and Company.
From a technical perspective, a rising trendline is in play that dates back to a low posted in late 2016. Buyer’s protected the trendline earlier this month on a momentum driven decline which reaffirms that it is widely watched and respected.
If you agree there’s further upside ahead for Centene Corporation, consider this trade which is a bet that the stock will continue to advance at least a little over the next seven weeks.
Buy To Open CNC 5Dec17 92.50 Puts (CNC171215P92500)
Sell To Open CNC 5Dec17 95.00 Puts (CNC171215P95000) for a credit of $1.18 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when CNC was trading near $94.50. Unless the stock rallies quickly from here, you should be able to get close to this amount.
If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee). Each contract would then yield $116 and your broker would charge a $250 maintenance fee, making your investment $134 ($250 – $116). If CNC closes at any price above $95 on December 15, 2017, both options would expire worthless, and your return on the spread would be 87% (1264% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run. Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Tags: Auto-Trade, Bull Put Credit Spread, Bullish Options strategies, Calls, CNC, Credit Spreads, Monthly Options, Portfolio, Profit, Puts, Risk, TastyWorks, Terry’s Tips, thinkorswim, vertical spreads, Weekly Options