October

23rd, 2022
Edition

SPX Monthly Chart

The S& P price is

below the moving
average line, so the
trend is down for
now. We’re going to
look at a Stock
Purchase, Put
Purchase, and two
Option Debit Spreads.

CVLG
Covenant Logistics Group, Inc offers transportation management and logistics
support services within the United States.

CVLG Monthly Chart

The monthly chart

shows that the CVLG
stock price is above the
monthly moving average
line. If the stock price is
above the monthly
moving average line, the
trend is up and bullish.
 CVLG Daily Chart
On the daily chart we can
see CVLG’s bullish
momentum following
August’s drop off. CVLG’s
next price target is to top
its previous July highs.

We recommend buying
CVLG stock at current
price levels.

XLU
The next profit opportunity we will review this week is a Put Option purchase in XLU,
or the Utilities Select Sector SPDR Fund ETF. XLU seeks to provide investment results
that correspond to the price and yield performance of the Utilities Select Sector Index.
XLU Monthly Chart
The monthly chart shows
that the XLU ETF price is
below the moving average
line. This signals a sell
signal and that the trend
is bearish for the ETF.
 The daily chart shows that XLU dropped like a rock from last month’s high until
this month’s low. A further decline for the ETF is expected.

XLU Daily Chart

As we said above, we want
to buy a put in XLU. We will
first look at selecting a put
option strike price for
purchasing an XLU Put
Option. XLU is currently
trading at 63.31. Let’s look
at buying the XLU
November 18 70-strike put.
The November 18 options
expire in 25 days.

The Put Option Purchase calculator will calculate the profit potential for a put option
purchase trade based on the price change in the underlying stock/ETF at option
expiration in this example from a 12.5% decrease 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 0.21 points (boxed in red). The time value of 0.21 is less
than 1% of the 63.31 stock price, so this strike price qualifies under the 1% Rule.

The second row from

Buy to Open the XLU Nov 18 70-Strike Put bottom of the calculator
lists the dollar profit
potential. The bottom row
lists the percent return
profit potential. We can see
that if the XLU ETF price
decreases 1% at option
expiration (boxed in green)
a 6.1% or $42 profit will be
realized. This confirms the
1% Rule of profiting with
only a 1% decrease in the
stock price.
There is no limit on the Buy to Open the XLU Nov 18 70-Strike Put
profit potential of put
option purchase if the
underlying stock continues •

to decrease in price. If XLU

decreases 10% between now
and option expiration, the
Put Option Purchase
Calculator shows that the
70-strike put will realize an
88.7% or $612 profit (boxed
in green).

On the other hand, if XLU remains flat at option expiration, the 70-Strike Put will only
lose -3% or -$21. 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 will 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 XLU November 18 70-Strike Put at current prices.

MTDR
The next profit opportunity we will consider this week is in MTDR, or Matador
Resources Company. MTDR is among the leading oil and gas explorer in the shale and
unconventional resources in the U.S.
MTDR Monthly Chart

The monthly chart shows

that the MTDR stock price
has been above the
monthly moving average
line since January 2021. If
the stock price is above
the monthly moving
average line, the trend is
up.
 MTDR Daily Chart
The daily chart shows that
MTDR has had a bullish
pattern of higher highs and
higher lows since the chart
started. The bullish pattern
points to a further advance.
We are going to review a Call
Debit Spread trade for MTDR.
Traders who want a more
leveraged approach can buy
MTDR calls.

Buy to Open the MTDR Nov 18 55-Strike Call

Sell to Open the MTDR Nov 18 65-Strike Call
We can see from this Call
Option Spread Analysis
that if the MTDR stock
price remains flat or
increases in price when
the options expire, the
spread will make a 37.9%
or $275 profit. The
profits slide down from
there. If MTDR is down -
7.5% at expiration, the
trade will make 0.3% or
$2.

NTRA
The last profit opportunity we will review is in NTRA, or Natera, Inc. NTRA offers
genetic testing and diagnostics with proprietary bioinformatics and molecular
technology.
 NTRA Monthly Chart
The monthly chart shows
that NTRA was in a strong
bear trend from last year’s
high until this year’s low.
The recent pause is expected
to be followed by a further
decline.

The daily chart shows that NTRA Daily Chart

NTRA declined sharply from
the November high until the
March low. The overall trend
since then has been sideways.
Sideways trading in a bull
trend is usually followed by a
further decline.
We are going to review a put
debit spread for NTRA.
Traders who want a more
leveraged approach can buy
NTRA puts.

Buy to Open the NTRA Nov 18 55-Strike Put

Sell to Open the NTRA Nov 18 45-Strike Put

We can see from this call

option spread analysis that if
the NTRA stock price
increases by 2.5%, remains
flat, or decreases in price
when the options expire, the
spread will make a 35.1% or
$260 profit. If NTRA stock is
up 7.5% at expiration, then the
spread will profit 10.2% or
$75.
 Join Chuck’s Weekly Option Alert!

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This week we recommended the following:

Buy CVLG Stock
Buy to Open the XLU Nov 18 70-Strike Put
Buy to Open the MTDR Nov 18 55-Strike Call
Sell to Open the MTDR Nov 18 65-Strike Call
Buy to Open the NTRA Nov 18 55-Strike Put
Sell to Open the NTRA Nov 18 45-Strike Put

Note: Profit performance displayed in this newsletter does not include

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

Good Trading and

we’ll see you next
week!