Obviously bullish move. 15% over 3 months. Time for options?
Using Elliott Wave (very basic analysis), we're likely in wave B of the correction, with a final punch up to the 0.236 fib which correlates perfectly with our current break out of the broadening wedge. Price target of $51 by mid Feb 2020, which correlates with the 1/3 timeframe of the broadening wedge.
Although, even if we believe and are confident the price will get there, how do we make money on it?
CLASSIC MOVE: PURCHASE SHARES OUTRIGHT
Assuming a $3000 position, our PT is 15% away at $51 (or $6.50 up). We'd make around $450, and tie up $3k for 3 months. Our entry would be at around $44.50, with our stoploss at $41.98. R/R of 2.6 to 1. Our total risk here is $170 for a potential gain of $450.
NEW MOVE: CALL OPTIONS
I looked at options (March 20, 2020 calls), and $44-$48 calls are priced at $3.10 to $1.30, with the best value call of $47 at $1.30. That means if we hit the PT of $51 by March and are ITM, plus the premium, puts our breakeven at $48.30, which means we're only up $2.70 per contact at a R/R of essentially 2:1 aka ($2.70 gain to $1.30cost). Total risk of $130 to make $270. Overall, it's not really worth it to me.
Let me know what you think!
Although, even if we believe and are confident the price will get there, how do we make money on it?
CLASSIC MOVE: PURCHASE SHARES OUTRIGHT
Assuming a $3000 position, our PT is 15% away at $51 (or $6.50 up). We'd make around $450, and tie up $3k for 3 months. Our entry would be at around $44.50, with our stoploss at $41.98. R/R of 2.6 to 1. Our total risk here is $170 for a potential gain of $450.
NEW MOVE: CALL OPTIONS
I looked at options (March 20, 2020 calls), and $44-$48 calls are priced at $3.10 to $1.30, with the best value call of $47 at $1.30. That means if we hit the PT of $51 by March and are ITM, plus the premium, puts our breakeven at $48.30, which means we're only up $2.70 per contact at a R/R of essentially 2:1 aka ($2.70 gain to $1.30cost). Total risk of $130 to make $270. Overall, it's not really worth it to me.
Let me know what you think!