This Friday marks weekly options expiration for three stocks on our radar. These types of trades present unique income opportunities that we frequently take to produce supplementary income at the end of the week. Criteria we are looking for with this type of setup:
- Income premium > $0.30 and at least 0.5% return.
- Expiration in less than 5 days.
- Uptrend based on 20 day SMA and MACD crossover.
- Some open interest for liquidity.
- No earnings announcements expected between now and expiration.
- At least 1% in-the-money for protection.
Deckers Outdoor is holding up very well, despite the carnage in the retail industry group. Price is just above the rather large VBP support level. In addition price is somewhat contained on the upside, for the same reasons, starting at the 57.00 zone. RSI and MACD histogram are flat, lending to neutral momentum. Bollinger bands are heading towards center, as volatility compresses. More than likely, price will stay within a narrow range over the next three days.
Deckers Outdoor Corp. DECK (close 54.01)
To enter this trade, buy shares of DECK stock at $53.80 per share in multiples of 100 shares and sell 1 option contract per 100 stock shares of the 2017 10-MAR 53.0 call option for $1.15. This trade will expire in 3 days and return 0.7% if the stock is assigned at expiration. Downside protection 2.1% (break even).
Marathon Oil – We’ve seen members trading MRO this week. Support at 15.60, with the 200ma just below this level. The stock is attempting to breakout of a 3 month downtrending channel. Price is above the 9/20ema, with RSI and MACD histogram showing flat momentum. Watch XLE as this whole may benefit from rotation into the energy sector.
USX – Marathon Group MRO (close 16.28)
To enter this trade, buy shares of MRO stock at $16.22 per share in multiples of 100 shares and sell 1 option contract per 100 stock shares of the 2017 10-MAR 16.0 call option for $0.33. This trade will expire in 3 days and return 0.7% if the stock is assigned at expiration. Downside protection 2% (break even).
Mylan Labs. MYL (close 43.33)
MYL was hit by sellers on Tuesday. We view this as an opportunity, as we discussed LIVE yesterday. The stock paused on major VBP support, delineated with the bold dashed HL.
Mylan Labs. MYL (close 43.33)
To enter this trade, buy shares of MYL stock at $43.45 per share in multiples of 100 shares and sell 1 option contract per 100 stock shares of the 2017 10-MAR 43.0 call option for $0.73. This trade will expire in 3 days and return 0.7% if the stock is assigned at expiration. Downside protection 1.7% (break even).
David Tepper is scheduled to be on CNBC today talking about his book. He recently purchased $1Billion in shares of four pharmaceutical companies, Mylan being one of them. That should buoy these stocks today.
Happy Wednesday
Vinny
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