This week we’re looking at another Investor’s Business Daily (IBD) Top 50 Listed Companies. We use this list in one of our options portfolios to identify outperforming stocks and place option spreads that take advantage of the momentum.
TMO is showing signs that it has returned to an uptrend and with a strong fundamental outlook, the stock could see a continuation higher. The following two articles provide more detail on the company’s fundamentals: Why could the earnings surprise continue for Thermo Fisher, and is recent Thermo Fisher Scientific Inc. stock performance driven by strong fundamentals?
The appeal to TMO from the technical side is the resurgence of the upward momentum since the beginning of the new year. TMO has risen from a flag pattern it contained for most of December, rising above a horizontal level near $ 482. A small decline cannot be ruled out in the short term, but the price action seems to suggest that TMO is poised to resume the previous uptrend with the aim of a new all-time high.
If you are okay with TMO having more benefits ahead of you, consider this trade, which depends on the stock staying above $ 510 by the time it expires in five weeks.
Buy to Open TMO 19FEB21 500 Puts (TMO210219P500))
Sale to open TMO 19FEB21 510 Puts (TMO210219P510) for $ 3.78 credit (sale of a vertical)
This balance is $ 0.02 below the midpoint of the options spread when TMO was trading near $ 512. 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 $ 376.70. This will reduce your purchasing power by $ 1000 and make your investment $ 623.30 ($ 1000 – $ 376.70). If TMO closes at a price above $ 510 on February 19, both options will expire worthless and your return on the spread will be 60% ($ 376.70 / $ 623.30) or 684% on a yearly basis.
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
We noticed that the Investor’s Business Daily The top 50 list has been a reliable source of stocks that are likely to rise higher in the short term. Recent additions to the list may be particularly good choices for this strategy, and deletions may be good indicators of getting out of a position you may already have in that stock.
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: Bearish Options Strategies, Bullish Options Strategies, Monthly Options, Portfolio, Profit, Profits, Puts, Risk, Thermo Fisher, TMO, Vertical Put Spread, Weekly Options
This entry was posted on Monday January 11th, 2021 at 2:45 p.m. and is filed under 10,000 strategies, coffee can investing, credit spreads, last minute strategy, lazy way strategy, monthly options, stock option trading idea of the week, weekly Options.