This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies. We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.
Consider IPG Photonics (IPGP) Following the Technical Breakout
In addition to being listed as one of the IBD Top 50 companies, Investor’s Business Daily recently wrote about IPGP, outlining the reasons why the growth stock is setting up for another advance. Also take a look at this publication which discusses why IPGP is trending.
IPGP broke higher late last week from a bullish flag pattern that has been setting up for most of the year thus far. Technical traders tend to keep a close eye on flag patterns, especially in assets that have had a strong trend which IPGP certainly displayed in 2017. Technical support is found nearby from a horizontal level at $248 which marks last years high. Also near the level is additional support from the top of the broken flag pattern.
If you agree there’s further upside ahead for IPGP, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.
Buy To Open IPGP 15JUN18 240 Puts (IPGP180615P240)
Sell To Open IPGP 15JUN18 250 Puts (IPGP180615P250) for a credit of $3.58 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when IPGP was trading near $151. Unless the stock rallies quickly from here, you should be able to get close to this amount.
Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $355.50 and your broker would charge a $1000 maintenance fee, making your investment $644.50 ($1000 – 355.50). If IPGP closes at any price above $250 on June 15, both options would expire worthless, and your return on the spread would be 55% (627% 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, Calendar Spreads, Calls, Credit Spreads, IPGP, Monthly Options, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, TastyWorks, Terry’s Tips, thinkorswim, Weekly Options