OOO CANADA CASH IN
46% EWC Canada ETF PROFIT EXIT
Place order to sell the EWC January $24 Call at $4.75 or better for nearly 50% return in five months.
ORIGINAL April 4th TRADE ALERT BELOW filled at $3.25
New Trade Alert for (EWC)
Buy EWC iShares Canada ETF January $24 Call @$3.25 or less
Risk Rating: 2 (1 = lowest 5 = highest)
Above Break Even Probability: 57%
Max Loss Probability: 10%
The broad market S&P is stuck not marking a new high in more than a month…A stall in the surge can be attributed to a quiet couple of weeks lacking fundamental facts with earnings reports to start again soon.
Another drag had been the Oil fall below $50 to put pressure on energy stocks. A double bottom in Crude and a 5% bounce last week has that market on the move once again.
Oh CANADA can be OOOOOO Canada with Oil making another upside push for the resource rich region. The Canadian stock market has slowed in the last few years on the tumble from triple digit Crude prices.
The iShares Canada ETF is barely positive in the last years compared to the S&P boom of 66%. Canada is a commodities play with a lot of bullish potential at these beaten down resource prices.
EWC traded between $24 and $26 for much of the last year breaking out and achieving the measured move target at $28. A second chance entry here leans on that old $26 resistance that is now support.
OOOOOO Canada can be headed to $30 on a push above the February $28 top.
This is an opportunity to use the power of options for a capital preserving stock substitution strategy.
The January option has almost ten months for Bullish development.
An In-The-Money option gives you the right to be long the shares from a lower strike price and costs much less than the ETF share cost itself.
The Options Way: Unlimited Upside Potential with Limited Risk.
A iShares Canada ETF long call option can provide the staying power in a potential larger trend extension. More importantly, the maximum risk is the premium paid.
One major advantage of using long options instead of buying or selling shares is putting up much less money to control 100 shares — that’s the power of leverage.
Choosing an option can sometimes be a daunting task with all of the choices and expiration months. Simply put, traders want to buy a high probability option that has enough time to be right.
The option strike price is the level at which you have the right to buy without any obligation to do so. In reality, you rarely convert the option into shares. Simply sell the option you bought to exit the trade for gain or loss.
There are two rules options traders need to follow to be successful.
Rule One: Choose an option with 70%-plus probability. The Delta is a measurement of how well the option reacts to movement in the underlying security. It is also important to buy options that payoff from only a modest price move.
There is no need to ONLY make money on the all but infrequent long shot price explosions.
Good Options can profit from just modest directional moves.
Any trade has a fifty/fifty chance of success. Buying In The Money options increase that probability. That Delta also approximates the odds that the option will be In The Money at expiration.
Buying better options are more expensive, but they are worth it — the chances of success are mathematically superior to buying cheap, long shot Out Of The Money lottery tickets that rarely ever pay off.
With EWC trading at $26.75, for example, an In The Money $24 strike option currently has $2.75 in real or intrinsic value. The remainder of any premium is the time value of the option.
Rule Two: Buy more time until expiration than you may need — at least three to six months for the trade to develop. Time is an investor’s greatest asset when you have completely limited the exposure risks.
Traders often buy too little time for the trade to develop. Nothing is more frustrating than being right but only after the option has expired premature to the market move.
Trade Setup: I recommend the EWC January $24 Call at $3.25 or less.
Only a close in the FXI ETF below $24 on a weekly basis would trigger an exit. Notice the $24 strike has the right to be long from a discounted level not seen since the end of June.
An option play also has staying power with the ability to ride through Ups and Downs that would force most stock traders out of the position.
The option also behaves much like the underlying stock with a much less money tied up in the investment. The Delta of this $24 strike is 85%.
The January option has nearly ten months of time for bullish development.
The maximum loss is limited to the $3.25 or less paid per option contract. New traders may want to use an exit stop loss at half the option premium to reduce dollar exposure. The upside, on the other hand, is unlimited.
The EWC option trade break even is $27.25 at expiration ($24 strike plus $3.25 or less option premium). That is about fifty cents above the current ETF price.
A push above $28 targets $30 which would put the option value at $6.00 to nearly double the original investment.