Back in September, I showed you the number one ETF to have in your portfolio right now.
Since then, it’s already gained 12.7% – with my proprietary tools predicting an even bigger move higher from here.
And I’m going to show you the easiest way to cash in on this price action by December 15.
Now let’s get started…
How to Make Fast, Easy Cash on FAS
As you may recall, the Direxion Daily Financial Bull 3X ETF (FAS) broke out to its 52-week high back in September before continuing its climb higher…
At the time, FAS broke out above its $54 resistance level, testing it as a new support level, which indicated a strong possibility of it moving even higher. I also offered a technical stop you could consider (anything below that $54 level).
But it didn’t retrace below that price point… it ran higher, peaking at $62 per share. That’s a price gain of $7 (or a seven-point price move) based on a starting price of $55 (which is where it was trading when we first talked about it back in September)…
That’s a 12.7% gain on just the stock! The rate of return using a long call or a call debit spread would have been a great deal more. And if you followed the strategy I proposed and captured profits – congratulations!
If you didn’t, fear not…
When it comes to options, think of them like public transportation – if you miss one bus, there’s always going to be another one coming. So if you miss out on the price movement of a stock and a profitable options trade, know that there will be another stock or ETF setting itself up for a price move for you to jump on.
In fact, that may be happening right now on FAS.
Even though this ETF ran from $55 to $62, it still took a couple of weeks to build a bit of a support at $58 before making its last leg higher to that $62 price. And on an intraday basis back on November 9, you can see that it traded down to $58 before bouncing off its low that day:
This created a longer tail on the Japanese candlestick, indicating solid buying off that price.
Now, as we discussed the last time around, any bullish option ideas you’re considering should be monitored for a technical stop loss point, and any closing low below the support price of $58 could be considered just that. As for the upside potential, I would anticipate a move to its prior pivot high of $62 as your first profit target. I’d consider using a call debit spread to take advantage of a pop higher.
Now if you were to buy a December 15, 2017 $58 call for $3, and it took until expiration for the ETF to reach $62, there should at least be $4.00 real (or intrinsic value). If you bought the call to open at $3 and then sold-to-close at $4.00, then that’s a $1.00 profit or a 33% return – not bad!
But what I’ve circled below is a December 15, $58/$61 call debit spread:
This involves buying-to-open a $58 call and selling-to-open a $61 call as one trade. That means you’re completing both sets of actions at the same time on the same order ticket. Now I’d try and work what’s called the “bid/ask” spreads on either side (or both sides) of these options and try to get the trade opened for no more than $1.50 per contract (or $150).
The way this trade reaches maximum profitability is if FAS gets above and stays above the strike price of the option you sold-to-open (the December 15, 2017 $61 strike price) at expiration. This should result in the market exercising its right to buy FAS at $61 and your account exercising the right to buy FAS at $58. That would result in $3.00 per contract (or $300) hitting your account, which would offset the original debit (price you paid) of $1.50 per contract (or $150 per contract). That’s an anticipated $150 profit on a $1.50 trade – a 100% rate of return.
Not too shabby!
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To your continued success,