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2024 Apr 04

The document provides an analysis of potential profit opportunities in stocks and options of several companies. It discusses buying shares in ET, buying a call option in NTAP, a call debit spread in XPO, and a call debit spread in RXST. Charts are presented to analyze the trends and support the trade recommendations. The document aims to educate readers on analyzing stocks and options using technical analysis and option strategies.

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Alejandro Mufardini
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29 views7 pages

2024 Apr 04

The document provides an analysis of potential profit opportunities in stocks and options of several companies. It discusses buying shares in ET, buying a call option in NTAP, a call debit spread in XPO, and a call debit spread in RXST. Charts are presented to analyze the trends and support the trade recommendations. The document aims to educate readers on analyzing stocks and options using technical analysis and option strategies.

Uploaded by

Alejandro Mufardini
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 7

April 4th, 2024

Edition

SPX Monthly Chart


With March 2024
trading at an end, the
S&P posted another
end of the month
close above the 10-
month moving
average line. This
shows the continued
bullish signal.
Today will look at one
stock purchase, a call
purchase, and two
option debit spreads.

ET
The first profit opportunity is a stock purchase in ET, or Energy Transfer LP. ET is
engaged in the pipeline transportation, storage, and terminaling for natural gas, crude
oil, NGLs, refined products, and liquid natural gas.
ET Monthly Chart
WT
The monthly chart
shows that ET closed
above the monthly
moving average line
every month since
January 2022. The next
targets are 20 and 25.
ET Daily Chart

The daily chart shows that


ET has been mostly trading
inside the Upper Keltner
Channel since early January.
That’s an excellent sign of
strength!
We recommend buying ET
stock at the current price
level. The ET dividend
yield is 7.88%.

NTAP
The next profit opportunity we will review this week is a Call Option purchase in
NTAP, or NetApp, Inc. NTAP provides enterprise storage as well as data management
software and hardware products and services.
NTAP Monthly Chart

The monthly chart shows


that NTAP has been rising
steadily since it closed
above the moving average
line and activated the
current buy signal last May.
The next targets are 115
and 125.
The daily chart shows that NTAP had a big gap up on March 1st. There’s an old
market adage that says to trade ibn the direction of wide range gaps, especially when
the gaps are in synch with the trend.
NTAP Daily Chart
As we said above, we want
to buy a call in NTAP. We
will first look at selecting a
call option strike price for
purchasing an NTAP Call.
NTAP is currently trading at
104.80. Let’s look at buying
the NTAP May 17 92.5-strike
call. The May 17 options
expire in 42 days.

The Call Option Purchase calculator will calculate the profit potential for a call option
purchase trade based on the price change in the underlying stock/ETF at option
expiration in this example from a 12.5% change in stock price to a flat stock price.
We developed what we call the 1% Rule to help us select an option strike price. The 1%
rule says to limit the time value portion of the option to less than 1% of the stock/ETF
price. If you limit the time value portion of an option to 1%, the stock price only
has to move 1% for the option contract to break even and start profiting.
The calculator will also calculate the time value portion of an option. With this option
purchase, the time value is 0.73 points (boxed in red). The time value of 0.73 is less
than 1% of the 104.77 stock price, so this strike price qualifies under the 1% Rule.

Buy to Open the NTAP May 17 92.5-Strike Call The bottom row lists the
percent return profit
potential. We can see that if
the NTAP stock price
increases 1% at option
expiration (boxed in green)
a 2.4% or $32 profit will be
realized. This confirms the
1% Rule of at least breaking
even or profiting with only
a 1% increase in the stock
price.
There is no limit on the Buy to Open the NTAP May 17 92.5-Strike Call
profit potential of a Call
Option purchase if the
underlying stock/ETF •
continues to increase in
price. If NTAP increases
10% between now and
option expiration, the Call
Option Purchase
Calculator shows that the
92.5-strike call will realize
a 75% or $975 profit
(boxed in green).
On the other hand, if NTAP remains flat at option expiration, the 92.5-Strike Call
will only lose -5.6% or -$73. Remember, if you purchase an at-the-money or out-of-
the-money option and the underlying stock/ETF is flat or down at option
expiration, it could result a 100% loss for your option trade! Using the 1% Rule to
select an option strike price can increase your percentage of winning trades
compared to trading at-the-money or out-of-the- money strikes and this higher
accuracy can make you a more successful trader.
We recommend buying the NTAP May 17 92.5-Strike Call at current prices.

XPO
The next profit opportunity we will review is in XPO, or XPO Inc. XPO is a provider of
asset-based less-than-truckload transportation principally in North America, with
proprietary technology which moves goods efficiently.

XPO Monthly Chart

The monthly chart shows


that XPO has been above
the moving average line
since last April. The next
targets are 140 and 150.
XPO Daily Chart
The daily chart shows that
the XPO stock price was up
more than 50% in February.
The overall trend since then
has been sideways. Sideways
trading in a bull trend is
usually followed by a further
advance.
We are going to review a Call
Debit Spread trade for XPO.
Traders who want a more
leveraged approach can buy
XPO calls.
Buy to Open the XPO June 21 105-Strike Call
Sell to Open the XPO June 21 115-Strike Call
We can see from this
Call Option Spread
Analysis that if the
XPO stock price
declines by -5%,
remains flat, or
increases in price
when the options
expire, the spread will
make 44.9% or $310.
If XPO is down -7.5%
at expiration, the
trade will make 18.7%
or $129.

RXST
The last profit opportunity we will review this week is a Call Debit Spread in RXST, or
RxSight, Inc. RXST engages in the research, development, manufacture, and sale of
light adjustable lenses and related equipment for cataract surgery.
RXST Monthly Chart

The monthly chart shows that


RXST has been above the
moving average line since
November. If the stock price is
above the moving average line,
the trend is up.

The daily chart shows that RXST Daily Chart


RXST was going almost straight
up from the October low until
the February high. The current
pullback gives us a buying
opportunity.
We are going to review a Call
Debit Spread trade for RXST.
Traders who want a more
leveraged approach can buy
RXST calls.

Buy to Open the RXST June 21 40-Strike Call


Sell to Open the RXST June 21 45-Strike Call

We can see from this Call


Option Spread Analysis that if
the RXST stock price declines
by -7.5%, remains flat, or
increases in price when the
options expire, the spread will
make 40.8% or $145. That’s
the same profit with a 7.5%
swing in either direction!
Want to Learn More from Chuck
Hughes? Click the Banner Below

This week we recommended the following:


Buy ET Stock
Buy to Open the NTAP May 17 92.5-Strike Call
Buy to Open the XPO June 21 105-Strike Call
Sell to Open the XPO June 21 115-Strike Call
Buy to Open the RXST June 21 40-Strike Call
Sell to Open the RXST June 21 45-Strike Call

Note: Profit performance displayed in this newsletter does not include


commission cost. Prices are based on Thursday End of Day.

We’ll see you next


week!

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