I don’t do this often. But today I’m giving all my Power Profit Trades subscribers a chance to join in on the Money Calendar’s latest trade.
This one’s kind of special, you see…
It’s one of the most dependable “money doublers” out there.
We’ve made this exact same trade on this exact same stock twice before – in the last three months – and we took triple-digit profits both times.
Now it’s your turn. I’m going to walk you through our latest trade, step by step, with detailed instructions on how and when to enter the trade, how to limit your risk, and when to get out. Of course, like all of my recommendations, this trade has the potential to return 100% in the next couple of weeks.
Here’s everything you need to get started…
Attacking PCLN into Earnings Season
Over the last few weeks I have made quite a case to my Money Calendar Alert subscribers that October was going to be the month of the big bounce.
And in just the last few weeks we have seen double- and triple-digit profits in Nike Inc. (NYSE:NKE), Fedex Corp. (NYSE:FDX), and The Priceline Group Inc. (NASDAQ:PCLN) to name just a few.
That’s why Money Calendar is one of my all-time favorite tools.
Let’s quickly review what Money Calendar does so you understand this trade opportunity from A to Z.
First, Money Calendar gives us an overview of market patterns on 250 stocks and ETFs, and displays them in a calendar format. For this week, overall market sentiment looks like this (which is why I’ve been predicting a bounce):
As you can see, the majority of this week is bullish. How does Money Calendar come up with the numbers above? Well, it crunches millions of data points calculating the average moves of those top 250 stocks and ETFs over the last decade.
Money Calendar provides the data and we use that to structure our options trades – if a stock made an average price move nine out of the last 10 years (or more), the likelihood it will do so again is very good.
Here’s what I see when I click into this week:
The chart above is just a small piece of what I see every day. PCLN rises to the top in average profits during this period, which is why it’s my trade for this week.
If you look closely, you’ll notice the pattern runs from now until November 14, 2015.
Now in a perfect world, this would be just fine, but as I told you, we’re coming up on earnings (for which Money Calendar does not account in all its data crunching). Given that earnings are due on November 3, we’re going to give ourselves the opportunity to exit early.
We already know the stock is incredibly likely to make a move to the upside over this timeframe – it’s done it nine out of the last 10 years.
The only thing left to determine is what kind of trade to take on PCLN. As you’ll see, that’s pretty easy to figure out.
How to Play PCLN Now
You might think it’s going to be too expensive to play a stock that’s trading around $1320.
But not with Money Calendar.
Today’s trade slashes the cost and risk of entering the position, allowing even a smaller trader to trade PCLN. Think about it a moment: How much does 100 shares of PCLN cost at $1320?
The answer… $132,000.
It’s crazy to think of putting that kind of capital to work for a 40-point move in the stock, or roughly a 2.5% gain.
And what if you’re wrong?
These are the questions a smart trader will ask before putting any money to work in the markets.
We’re going to target call options, but even calls on PCLN are expensive.
As of this writing, the PCLN November 6, 2015 1320 calls, which give the buyer the right to buy PCLN at 1320 a share, are trading for 58 points! That’s $5800 a contract, which is cheaper than the stock, but still much more than the $500 average risk I like to take with my Money Calendar trades.
So how do we get in the big game here with PCLN while risking less?
Easy: the “Loophole Trade.” More specifically, we’re looking for PCLN to make a bullish move, so we want to place a bullish loophole trade.
Remember, a bullish loophole trade involves buying-to-open lower strike call options while simultaneously selling-to-open higher strike call options with the same expiration for a spread price (it’s also known as a Vertical Call Spread or a Bull Call Spread).
For example, if we buy strike prices that are 10 points lower than we sell, we have created a 10-point spread. This is the most that the trade can be worth at expiration, so I want to get this for cheaper to increase our potential.
In most cases, I like to buy any spread for no more than 40% of its full value. In the case of PCLN, I am looking to buy the spread below for a just $4.
So here’s what to do…
Actions to Take:
Entry Date: October 13, 2015 (today)
BUY-to-Open: The Priceline Group Inc. (NASDAQ:PCLN) PCLN November 6, 2015 $1320 Call (PCLN151106C01320000) AND SELL-to-Open: The Priceline Group Inc. (NASDAQ:PCLN) PCLN November 6, 2015 $1330 Call (PCLN151106C01330000) to create a November 6, 2015 Vertical Call Spread for $4.00 or less.
Exit Date: November 4, 2015
Exit Strategy/Profit Taking Option:
SELL-to-Close: The Priceline Group Inc. (NASDAQ:PCLN) PCLN November 6, 2015 $1320 Call (PCLN151106C01320000) AND BUY-to-Close: The Priceline Group Inc. (NASDAQ:PCLN) PCLN November 6, 2015 $1330 Call (PCLN151106C01330000) for a 100% return.
|Here’s your trading lesson summary:Here’s your trading lesson summary:It’s time to put your education to the test with a live, actionable case study. Here are a few things to keep in mind as you make this trade:
- When targeting an expensive stock, the “loophole trade” is a great way to slash your cost… and your risk.
- A bullish loophole trade involves buying-to-open lower strike call options while simultaneously selling-to-open higher strike call options with the same expiration for a spread price
- We’re targeting weekly options to give ourselves flexibility around earnings.
We’ll monitor PCLN over the month and see how this trade matures, so stay tuned!
America’s #1 Trader