Not long ago, we exited half of the AVAV position for 34%.  Now, as AVAV begins to pullback, we’re recommending that you exit the second half at $53.73.

We can always buy back in at a later date.

As for new trading ideas, after a recent pullback from $37.35 to $36, the stock found support (marked by a long legged doji cross) and could move higher from this point. We believe that if the stock can break above its 200-day moving average, we could see a potential test of $38.50, near-term.  To potentially profit from this, buy to open the AT&T (T) February 16, 2018 36 calls at current market prices.

This isn’t the first time we’re trading AT&T.

In fact, over the last few weeks, we took 55% and 177% on the T January 34 calls, and 97% and 139% on the T February 34 calls.

Traders Daily Education

Without a doubt, options offer great leverage, as well as flexibility.

At times, they can offer us income almost out of thin air. They offer us the ability to make money if the price of the underlying instrument doesn’t even move.

But it gets even better than that.

Let’s say I wanted to buy 100 shares of Disney (DIS) in early December 2017, as the stock traded at $106 a share. It would cost me $10,600.

Not many of us have that kind of money just sitting around.

So, we can opt to pick up an option contract, which allow us to control 100 shares without ever taking ownership of those shares.

Let’s also I chose to buy the DIS February 16, 2018 105 calls with a current price of $4.75 (or $475 - $4.75 x 100 shares in a contract). If DIS now moves up $5, I made a whopping 5% on $10,600 risked. However, with that same $1 move in the stock, I had the opportunity to earn 60% on $475 risked.

We came to that conclusion by relying on Options Greeks, which help me figure out how much money I can make based on set criteria characterized by five Greek symbols. For example –

  • Delta tells us how much an option will change every time our stock moves up $1. For example, with the DIS February 16, 2018 105 calls, I can see that for every $1 move higher in the underlying DIS stock, I earn $0.5696 at the moment.
  • Gamma tells us how much the delta can increase every time the stock moves higher. For every $1 move higher in the DIS stock, gamma tells us how much more the delta will increase by. For example, if DIS moves to $107.00, delta will increase in value by 0.0370. It may not seem like much, but it adds up.
  • Theta is time decay. It will tell us how much our option price loses every day. For every day you hold an option it will lose value. That’s just how it is. Nothing in life is without risk. Theta tells us that our call option will lose just over three cents at the moment. This will speed up and get bigger as you near expiration.
  • Vega tells us how much an option price will change on moves in volatility.
  • Rho tells us how much options will change with interest rates. No one really pays much attention to rho any more. The rate of change here doesn't move much.

In a nutshell, that’s how we can calculate potential rewards. And as you can see with our DIS examples, the rewards can be quite big.

Always account for probabilities each time you open a new options trade.

Open Positions: 

Micron Technology (MU) stock – $43.20

MU February 16, 2018 44 calls -- $3.20

This trade was issued just yesterday.  Both remain on hold, as the stock remains oversold.

Merck (MRK) stock -- $55.50

MRK January 18, 2019 57.50 call -- $3.25

MRK is up to $56.34 at the moment.  Hold both positions.

AT&T (T) stock -- $34.45

Hold the stock.  It’s now up to $36.90.  Hold.

AeroVironment Inc. (AVAV) stock -- $42.80 – exiting second half today

We are exiting the second half of this trade today.

Pro Shares Ultra Short S&P 500 (SDS) -- $45.15

This remains a hedge against the long positions.

First Data (FDC) stock -- $17.80

We continue to hold with the stock now trading at $16.42.

Cypress Semiconductor (CY) -- $15.37

The stock is now up to $15.42 and is a hold.

Carnival (CCL) -- $66.50

We already exited half of the calls for a win of 67% in September 2017.  We exited the second half of the calls at a loss, but still hold the stock with a price target of $70.

Advanced Micro Devices (AMD) -- $13.30 entry

The stock last traded at $10.16 and remains on hold.

Closed trades: 

  • Exited half of Zillow Group (Z) for 8% gain on August 8, 2017
  • Exited half of Zillow Group (Z) November 45 calls for 44% gain on Aug 8, 2017
  • Exited half of CELG October 2017 130 calls for 150% on August 31, 2017
  • Exited second half of CELG October 130 calls for 143% on Sept 1, 2017
  • Exited GOLD Sept 92.50 put and 95 put for a full loss
  • Exited half of LOW September 2017 75 calls for 71% on Sept 7, 2017
  • Exited VNDA stock for 8% on September 8, 2017
  • Exited VNDA October 2017 16 calls for 35% on September 8, 2017
  • Exited second half of LOW October 2017 75 call for 92% on Sept. 8, 2017
  • Exited LOW stock for 4% on September 8, 2017
  • Exited half of FEYE stock for 13% gain on September 12, 2017
  • Exited half of FEYE Dec. 14 calls for 68% gain on September 12, 2017
  • Exited half of FEYE Dec. 15 calls for 63% gain on September 12, 2017
  • Exited half of CCL October 2017 67.50 calls for 67% on September 13, 2017
  • Exited VIX October 2017 15 put for 18% on September 13, 2017
  • Exited VIX October 2017 14 put for 17% on September 13, 2017
  • Exited ZIV stock for 2% on September 13, 2017
  • Exited SVXY stock for 9% on September 13, 2017
  • Exited AMD September 2017 13 calls for a full loss, expired worthless
  • Exited second half of FEYE stock for 16% gain on September 14, 2017
  • Exited second half of FEYE Dec. 14 calls for 100% gain on September 14, 2017
  • Exited second half of FEYE Dec. 15 calls for 89% gain on September 14, 2017
  • Exited CRUS stock for a loss of 7% on September 22, 2017
  • Exited CRUS October 2017 60 calls for a full loss on September 22, 2017
  • Exited half of AJRD November 2017 30 calls for a gain of 200% on Sept 22, 2017
  • Exited half of AJRD November 2017 30 calls for a gain of 168% on Sept 22, 2017
  • Exited AJRD stock for a gain of 13% on September 22, 2017
  • Exited half of AOBC January 2018 17 calls for a gain of 47% on Oct. 4, 2017
  • Exited half of EXPE October 145 calls for 22% gain on October 6, 2017
  • Exited CCL October 2017 67.50 calls for a loss of -37% on October 17, 2017
  • Exited half of Shopify Inc. stock for a gain of 10% on October 25, 2017
  • Exited half of SHOP November 105 call for a gain of 79% on Oct 25, 2017
  • Exited TRUE stock for a loss on November 7, 2017
  • Exited TRUE January 2018 16 calls for a loss on November 7, 2017
  • Exited half of DIS December 15, 2017 100 calls for 44% on Nov. 8, 2017
  • Exited SHOP stock for a -10% loss on Nov. 9, 2017
  • Exited SHOP November 105 calls for a full loss on Nov. 9, 2017
  • Exited DIS stock for a gain of 5% on November 13, 2017
  • Exited second half of DIS Dec 2017 100 calls for a gain of 86% on Nov 13, 2017
  • Exited half of DIS Jan. 19, 2018 105 call for 100% gain on November 30, 2017
  • Exited half of AT&T January 19, 2018 34 call for a 55% gain on Nov 30, 2017
  • Exited half of AT&T February 16, 2018 34 call for a 97% gain on Nov 30, 2017
  • Exited half of DIS Jan. 19, 2018 105 call for 404% gain on Dec 4, 2017
  • Exited half of AT&T January 19, 2018 34 call for a 177% gain on Dec 4, 2017
  • Exited half of AT&T February 16, 2018 34 call for a 139% gain on Dec 4, 2017
  • Exited half of BBY stock for an 11% gain on December 5, 2017
  • Exited half of BBY Dec 15, 2017 57.50 calls for a 102% win on Dec 5, 2017
  • Exited half of AVAV stock for a 34% win on December 6, 2017
  • Exited RGR stock for a loss of 1% on December 11, 2017
  • Exited AOBC stock for a loss of 12% on December 11, 2017
  • Exited AOBC January 2018 17 calls for a full loss on December 11, 2017

Ian L. Cooper

Traders Daily