Strong 'Buy' Signal for NFE Stock Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play! As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs in the coming days and weeks and the stock should be purchased. Our initial price target for NFE stock is 68.24 per share. Profit if NFE Is Down 10% Since NFE's 1-Month Price is trading above the 10-Month SMA, this means the stock will likely rally from here. Let's use the Optioneering calculator to look at the potential returns for a NFE covered call trade. Covered calls are also known as buy writes. The Buy Write Calculator will calculate the profit/loss potential for a covered call trade based on the price change of the underlying stock/ETF at option expiration in this example from a 10% increase to a 10% decrease in NFE stock at option expiration. The goal of this example is to demonstrate the 'built in' profit potential for covered calls and the ability of covered calls to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don't list the option strike price used in the profit/loss calculation. The prices and returns represented below were calculated based on the current stock and option pricing for NFE on 10/20/2020 before commissions. Built in Profit Potential For this covered call, the calculator analysis below reveals the cost or the breakeven price is $3,851 (circled). The maximum risk for a covered call is the cost of the covered call. The analysis reveals that if NFE is flat at 51.86 or up at all at expiration the covered call will realize a $1,149.00 profit and a 29.8% return (circled). If NFE decreases 5.0% at option expiration, the covered call will realize a $1,075.70 profit and a 27.9% return. And if NFE decreases 10.0% at option expiration, the covered call will realize an $816.40 profit and a 21.2% return. Due to option pricing characteristics, this covered call has a 'built in' 29.8% profit potential when the trade was initiated. Covered call trades can result in a higher percentage of winning trades compared to a directional stock trade if you can profit when the underlying stock/ETF is up, down or flat. A higher percentage of winning trades can give you the discipline needed to become a successful trader. The Optioneering Team is here to help you identify winning trades just like this one.
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