In a stock market no higher than it was 18 months ago, this trade is beating the pants off the SP500
Welcome to the June 21st, 2019 Income Millionaire Insider update.
I hope you’re enjoying the very specific Apple options trade I showed you on Tuesday. We’re coming up on the exact same set up in Exxon Mobile (XOM).
When the price of Exxon Mobile stock moves above the 200 day moving average, which hasn’t happened just yet, the price is recovering from a pullback. You can see the pullback started in late May of 2019. When the price moves above its 10 day moving average, the stock is in a short-term uptrend, which you can see has already happened. Not only do we need both of these to be true to do the trade, but we need Exxon Mobile’s stock price to have room to run to the upside. It can’t be overly popular in the short-term. In this trade, we’re defining this as having a Relative Strength Index of less than 70. You can see here it’s at 42 right now. Please know I’m using the 50 day period when calculating the RSI.
Over the past 2 years, when these conditions have been met, when we buy a 30 days to expiration, 50 Delta Call option, on average this trade made a 45% return and a 424% total return. The last 7 times we’ve been able to do the trade, this trade has won 6 times and only lost once.
For example sake, let’s say we could do this trade now, I’d be looking at the July 26th, 2019 expiration. I’ll show you why in a moment why I wouldn’t chose the July 19, 2019 expiration. Again, I’m looking for the Strike price most closely associated with 60 Deltas.
Be careful. July 26th is the approximate, but not definite earnings call date. We do not want to hold this trade through the earnings call, so if we do get into this trade in the near future, we want to sell before earnings.
Here’s our exit strategy. If this trade makes 60% on this option trade, we can use Time Stops to exit this trade, selling one Call option at a time, and slowly taking our money off the table. If this trade is making money, but not yet to the 60% return threshold or if you let your remaining options contracts run, we’re selling after holding the Call option for about 25 days or so, so purely in this example, on or about the 19th of July. Should the trade not make money, you will need to decide for yourself how wrong you’re willing to be before you sell and get out of a losing trade.
Please remember this information can change quickly, and the prices I’m showing you now may likely be different when you look at them, so reach out to me if you have any questions.
Congratulations on getting our June 21st, 2019 edition of the Income Millionaire Insider update. These are our thoughts, but this is not investment advice, so please get professional help if you need it. Make good deals and we’ll see you next week.