Futures are currently higher this morning, with S&P500 futures trading 2,349.75 (+3.25), as oil prices edge higher this morning. We see WTIC and CL reversing overnight losses as the market weighs efforts by major producers to cut output to reduce a global glut. Thus, the current outlook is mixed.
The Baltic Dry Index (BDI) broke out of a ten year downtrend in November 2016. Since then, the shippers have retested the breakout zone and resumed its change of course. RSI and STO are pointing higher, as price action remains firmly above the 9/20ema on this monthly chart. While this index plots a course higher, we anticipate back and fill, so we will look for income opportunities as they arrive.
SBLK is one candidate that continues a bullish trend. The stock broke out in partnership with the BDI index. Star Bulk has risen ovee 100% since the January break above its base on base pattern. The current support level is delineated by VBP, give or take 50 cents. Therefore downside is roughly (-1.25) from the Wednesday close.
We would like to get into calls around 1.65 or better this morning. Ask was 1.90 at the close. This is the way the trade looks for now.
We can potentially generate $1,650. We will consider buying 1000 shares of SBLK and immediate selling 10 contracts of SBLK 2017 19-MAY 10.00 CALL. If the stock is above 10.00 by expiration, we will make a profit of $380. This trade also provides 14.6% worth of downside protection for the position.
- Premium received:$1,650
- Potential Profit if Stock is Above Strike: $380
- Downside Protection: 14.6%
Earlier Wednesday, SBLK was trading near $11.71 per share. Had we traded the calls then we could have sold the 2017 19-MAY 10.0 call option for $2.00. We are looking for a bounce to capture a higher premium, so we will wait for that opportunity to develop today. This trade will expire in 44 days and return 3.0% if the stock is assigned at expiration.
Personally, the ease at which the indices sold off yesterday, causes me to be skeptical. We need time to analyze what is going on at the present time. My question currently; is this distribution or base from which we can move higher? Baltic Dry Index suggests the longer term trend is still higher, as goods need to be shipped. More jobs equals more demand.
Happy Thursday? And yes, that is a question……
Have a good day
Disclaimer: Do your Own Research
Our content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on our Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise.
We would like to draw your attention to the following important investment warnings. The value of shares and investments and the income derived from them can go down as well as up; Investors may not get back the amount they invested – losing one’s shirt is a real risk; past performance is not a guide to future performance.