Trade Alert

By: Gregory Clay | Wed, May 21, 2014
Print Email

5/20/2014 11:11:45 PM


Market Summary

As confirmed in the daily chart below, LinkedIn Corporation stock (LNKD) started a correction at the beginning of March and the price kept dropping until the start of April. In the last 2 weeks of April the price recovered, then the stock crashed at the beginning of May after LinkedIn's earning's announcement. As highlighted in the chart, LinkedIn stock appears to have bottomed out at a support level the past few weeks. Also, as noted in the chart technical trends are neutral and momentum indicators are turning bullish.

LNKD Daily Chart

Whenever you are evaluating one of the stocks on your watch list that has been in free-fall you need solid confirmation the crash has ended. As discussed above, the daily chart signals LinkedIn Corporation stock price has stabilized. If we analyze further by looking at the longer term weekly chart below, we note the price has held above firm support the past few weeks and the strength indicator is oversold and due for a bounce.

LNKD Weekly Chart

This is opportunity to profit from executing a LinkedIn Corporation, Inc. (LNKD) weekly income trade. We are utilizing a bull put spread because the stock just needs to stay above the price of the sold option another 10 days for this strategy to work.


LNKD Weekly Trade Setup

We are opening an end-of-May expiration LinkedIn Corporation, Inc. (LNKD) bull put spread. The LNKD put spread needs to generate a minimum .45 net credit AND we prefer an 80% probability that the short put contracts will expire worthless and we get to keep most of the sold premium. The spread in the table below complies with our trading rules for initiating a ten-day option expiration LNKD bull put spread (based on Tuesday's closing bid/ask mean). The suggestion is to submit a limit order to purchase/sell the option strike prices below. Please confirm the correct option symbols with your broker.

LNKD Bull Put Spread

Premium Credit $.53
Total Option Premium Received $530 (Excludes commissions and fees)
Maximum Risk $4,470
Margin Requirement $5,000
10 contracts traded on each leg (number of contracts can be increased or decreased based on risk tolerance and/or funds available to trade; this will impact Total Premium Received, Maximum Risk amount, and Margin Required)

If prices gap up the put spread may not be available as published and unless the gap is filled we will hold off on the trade. Conversely if prices drop sharply then we will play is safe and hold off on the trade.


Exit Plan

The strategy is to let all the option contracts expire worthless. However if our short strike is violated (price below the short strike) we will look to close out this spread (buy the short contracts, sell the long). Try not to overreact and rush to close the trade, many times the market will reverse itself and remove the sense of urgency. If our short strike has been violated and there is no price reversal, we cut our losses and live to fight another day.

Regards,

 


P.S. sign up for $1 trail subscription to hot option trading newsletter Easy Money Options Income

 


 

Gregory Clay

Author: Gregory Clay

Gregory Clay
Option Strategist
High Value Option Trader
Weekly Income Credit Spreads
Easy Money Options Income

Important Disclosure
Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.

Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.

In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.

For a complete understanding of the risks associated with trading, see our Risk Disclosure.

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/