DHR – a medical diagnostics and research company – reported profits Thursday morning that blew up estimates. Adjusted earnings were $ 2.52 per share, up from 81 cents last year and analysts’ estimate of $ 1.76. Sales increased by 58% compared to the previous year and slightly exceeded expectations. The company has been strengthened by the strength of its core business and by products related to Covid-19 vaccinations, therapeutics and diagnostics. Analysts were clearly impressed when the company received a series of target price increases between $ 270 and $ 315 (the stock closed at $ 260 on Friday).
The earnings news resulted in DHR gaining more than 6% in two days, reaching record highs on both days. More importantly, that strength drove stocks above the stubborn resistance at $ 248. This area defined peaks in November, January, February and the week before the result. With a clear sail ahead and strong fundamentals behind, DHR should stay above the trading range that dominated its price action for the past six months.
If you are okay with DHR ready for a new uptrend, consider the following trade, which depends on the stock staying above $ 250 by the time it expires in eight weeks.
Buy to Open DHR 18Jun21 240 Put (DHR210618P240)
Sale to open DHR 18Jun21 250 Put (DHR210618P250) for $ 2.00 credit (sale of a vertical)
This balance is $ 0.02 below the midpoint of the options spread when DHR was trading at $ 260. If the stock doesn’t recover quickly from here, you should be able to get close to that amount.
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 198.70. This trade reduces your purchasing power by $ 1,000 and brings your net investment to $ 801.30 ($ 1000 – $ 198.70). If DHR closes above $ 250 on June 18, both options will expire worthless and your return on the spread will be 25% ($ 198.70 / $ 801.30).
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: Bullish Options Strategies, DHR, Earnings Option Strategy, Portfolio, Profit, Profits, Puts, Risk, Vertical Put Spread, Volatility, Weekly Options
This entry was posted on Monday, April 26th, 2021 at 1:27 p.m. and is filed under strategy for earnings reports, last minute strategy, monthly options, trading option for stock options of the week.