Options Action Friday — Up to 300% With This New Trade
Of all the major market news this week, leading the way is the fact that all three major stock indexes hit new record highs again as stellar earnings reports continue to prove our economy is on the upswing.
This week, the Dow has risen 22 points through midday Thursday, or 0.06%. Gains for the major index are over 15% year to date. The S&P 500 also netted a new record high this week, jumping 17 points, or 0.4%, as of midday Thursday. The Nasdaq, a perfect proxy for Big Tech, rose 120 points, or 0.8%, through midday trading Thursday. And on the year, the S&P 500 and the Nasdaq are up 17.7% and 14.3% this year, respectively.
You don’t have to look very far for a reason behind the rise in equities. Fantastic earnings reports from companies across every sector are powering stocks to brand-new highs almost daily.
The current momentum we’re seeing in stocks, fueled by optimistic earnings as proof the United States economy is on the upswing, sets us up for some great fast-money profit opportunities.
Options and Earnings — A Perfect Strategy for Big Profits
Earnings season is typically one of those semi-predictable events where you can anticipate larger-than-normal moves in equities. Additionally, implied volatility (IV) — which is the market's forecast of a likely movement in a security's price — may also rise to unusually high levels in the days or weeks leading up to an earnings release.
This is because a company’s earnings report is considered one of the best ways to determine the financial “health” of a company, as well as headwinds and tailwinds that may impact the company in the future. As such, the information provided on a company's earnings call can have a significant impact on share prices.
As an options trader, I view this potential for outsized moves in price as an opportunity. This is the same strategy we used just a few weeks ago to lock in triple-digit wins on Starbucks and the VanEck Semiconductors ETF as well.
Today I want to share another one of these potential high-gaining opportunities with you.
This Tech Company Is a Top 10 Pick for 2021
Back on January 1 of this year, I wrote to you about a stock I thought would easily outpace the greater market and offer you strong returns without the volatility that accompanies many other tech stocks.
That company was Dell Technologies Inc. (NYSE: DELL).
Dell develops data storage, virtualization, analytics, cloud computing, and other advanced automated solutions that enable organizations to store, manage, protect, and analyze massive amounts of data at incredible speeds.
The company’s Dell EMC PowerStore solutions are its latest bell-cow offering. This technology offers clients adaptable infrastructure platform solutions that combine the advantages of cutting-edge storage hardware using flexible, intelligent automation and a data-centric design.
These and other technical factors led to its recommendation, and to date that position is up 33% on the year.
And as we head toward Dell's Q2 earnings report call, which will be held this August 26, now is the perfect time to build on our gains with this company and take a swing on a lucrative options play.
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Here’s the Trade
Today’s call option to consider is Dell Technologies Inc. (NYSE: DELL) September 2021 $105.00 call(s) that expire(s) on September 17, 2021.
My bull case on Dell is pretty clear, and ahead of earnings I expect a sharper-than-normal run-up in shares as folks anticipate a strong report. Moreover, Dell's share price is consolidating into a tight range, about $6 off previous record highs.
As the price tightens and coils like a spring, I expect shares to break out to the upside in the final few weeks leading into the August 26 report. This should give us a nice flash gain that could hit triple digits!
Action to Take: Buy one or more Dell Technologies Inc. (NYSE: DELL) September 2021 $105.00 call(s) that expire(s) on September 17, 2021.
The price of this option is $136 per option contract.
Once we’re in the trade, our goal is to sell the contract as we near the expiration date, ideally at a price of around $3 for roughly a 300% gain. Keep in mind, however, this is an active management strategy, and you will want to check the prices daily until you reach a gain where you're comfortable with how much time remains until expiration.
Conversely, if the stock starts to slide away from our strike price of $105, we will actively manage this risk and sell before the option expires, minimizing our losses.
To recap, here’s today’s option trade:
Buy one DELL September 2021 $105.00 call(s) with the expiration date of September 17, 2021.
- Strike Price = $105
- Expiration Date = September 17, 2021
- Premium = $136
- Max Loss = $136
Since this option expires in six weeks from today, be sure to check back in every Friday for updates on this trade and for our next trade in the new Options Action Fridays series.
To your wealth,
Editor, Energy and Capital
After spending 10 years in the consumer tech reporting and educational publishing industries, Sean has since redevoted himself to one of his original passions: identifying and cashing in on the most lucrative opportunities the market has to offer. As the former managing editor of multiple investment newsletters, he's covered virtually every sector of the market, ranging from energy and tech to gold and cannabis. Over the years, Sean has offered his followers the chance to score numerous triple-digit gains, and today he continues his mission to deliver followers the best chance to score big wins on Wall Street and beyond as an editor for Energy and Capital.
Editor’s note: On an unrelated but equally exciting note…
Facebook CEO Mark Zuckerberg may have tipped his hand regarding the biggest thing to happen to the internet since, well, the internet. Zuckerberg spilled the beans on his little secret during the company’s last earnings call, and my colleague and market expert Chris DeHaemer is one of the few who picked up on it.
See what Chris uncovered right here.
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