For non-traders, a lot of the time conversation is just that. Conversation.
For me, conversations lead to thinking, “How do I capitalize on this information?” or “Is there potential for a winning trade based on this discussion?”
I had a conversation with some neighbor friends of mine who recently got back from a trip to Las Vegas.
My friends pointed out that “Millennials” were there, but they were not gambling. In addition, the consensus was that activity was slow across the board for all age groups.
Armed with this “inside” first-hand knowledge, I did what comes naturally: find an opportunity to double my money.
What I found was a first-class WYNNer…
This WYNNing Stock Set Up a Bear Play for Big Profit
As part of my due diligence on finding a profitable trade, I went to my Money Calendar to find an opportunity on the gaming industry…
And I found it in Wynn Resorts, Limited (Nasdaq:WYNN).
My Money Calendar showed me that WYNN historically dropped $9.09 between April 21 and June 10. Once I had that info, I also knew I had to put on a trade.
Let’s take a look at the setup below:
At the time of my analysis, the stock was trading at $126.77. Once I subtracted $9.09 from that price, my target price to the downside was $117.68, with the expected end date for the move by June 10.
I decided to set up a scenario of a Put Debit Spread, also known as a Bear Put Spread, for the standard third Friday of the month expiration.
The way this trade maxes its gains is for the stock to close under the strike price of the sold option at expiration or close to expiration.
The WYNNer Delivered a 200% Return
WYNN indeed dropped in price as anticipated. It not only dropped to the target price, but went well below that to a price around $98.60,as you can see on the chart below.
Fast forward to 06/01/2015, and below is the case study closing scenario: +3.22 or +$322 per contract, making the ROI +213%.
Here is what the trade scenario looked like to end the trade.
Max profit obtained!
Now, any trader could have easily just closed the trade once the target price was reached. This trade was held a bit longer than the target price and end date since the downward slide was performing quite well.
This is why I look for options that expire after the end date calculation by Money Calendar. This gives you the chance to let the trade work a little bit longer than you feel it needs, versus having an expiration that hits before the stock gets a chance to reach its target price.
Thank you tools for the win on WYNN!
Until next time…
America’s #1 Trader