Posted in
Strategy
By: Tom Gentile
on May 9th, 2022
Money Calendar is showing definitively green this week, meaning there are more candidate with a history of bullish over bearish price moves in its history the past 10-years.
We know though, that today’s market environment hasn’t been playing out as consistent with all the concerns of a war going on, high inflation causing our Fed to be hawkish and aggressive with their rate hikes to come.
The bearish patterns that fit our ideal profile have been tough to find because of the past 10-yr bullish run and that has caused us to highlight some short-term call credit spreads that have worked. We will highlight t one more this week.
And we have a bullish pattern on a stock holding up pretty well despite the market slide.
Bullish Opportunity #1: Northrup Grumman Corporation (NYSE: NOC)
Sector: Industrial and Industry: Aerospace and Defense. NOC is a global aerospace and defense company with many different segments of their company specializing in many aspects of its industry.
BULLISH:
Action to Take #1: Call Debit Spread
Entry Date: June 10, 2022
Buy-to-Open: Northrup Grumman Corporation (NYSE: NOC) NOC June 10. 2022, $435 Call (NOC2200610C00435000) and Sell-to-Open: Northrup Grumman Corporation (NYSE: NOC) NOC June 10. 2022, $440 Call (NOC2200610C00440000) Creating a Vertical Call / Debit Spread for a limit of $2.10
Exit Strategy / Profit Taking Option
SELL-to-Close: Close the entire position for a 100% Return on Investment (ROI)
Exit Date: June 07, 2022
Bearish Opportunity #2: Lowe’s Companies, Inc. (LOW)
Sector: Consumer Cyclical and Industry: Home Improvement Retail
BEARISH:
Action to Take #2: Call Credit Spread
Entry Date: May 02, 2022
Sell-to-Open: Lowe’s Companies, Inc. (LOW) LOW May 06, 2022, $210 Call (LOW220506C00210000) and Buy-to-Open: Lowe’s Companies, Inc. (LOW) LOW May 06, 2022, $212.50 Call (LOW220506C00212500) Creating a Vertical Call Credit Spread for a net credit/limit of $0.27 or better.
Exit Strategy / Profit Taking Option
Buy Back-to-Close: Anticipate LOW stays under Sold Strike in spread ($210) at expiration so options expire and realize 100% of premium sold.
If one were to make 0.27 on 2.50 risk, ROI = 12.11% (better than 1% ROI goal)
Exit Date: May 06, 2022
App: Toms Option Tools
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