Options for stock investors. A better way to trade.

SUN SHINE PLAY SUNPOWER – Buy SPWR JUNE $4 Call @ $1.60 or less

Sun Shine SPWR 80% profit in 2018 and 56% profit in 2017

 

New Trade Alert for (SPWR)

SunPower June $4.00 Call @$1.60 or less

 


 

Risk Rating: 2.0     (1 = lowest   5 = highest)

Above Break Even Probability: 45%

Maximum Loss Probability: 16%


 

 

S&P, DOW and Tech have all gotten back half of the drop from the fall of 2018 top. 

 

The unkind unwind is an opportunity to pick up some sale stocks.

 

Reminder, every selloff in market history has bounced back to make new higher highs…

 

The future is bright!!!

 

Solar stocks suffered in 2018 on Trump tariffs and trade concerns.  The sector slump looks to be temporary with an opportunity to take advantage of the distress downturn.   

 

SunPower has tracked from $5 to $10 since the middle of 2016.

 

 

 

 

 

The lows nearly in December saw bullish divergence meaning no new corresponding high in volatility to signal short sellers had been exhausted.

 

 

 

 

 

A recovery rally targets the $7.50 of the midpoint area of the multi year trading range. 

 

The SPWR December $4.55 bottom was a price not seen since 2012.  

 

SunPower is stuck in a $5 to $10 trading range over the last few years.  A breakout from this base targets $15 again last seen in 2016. 

 

This was a $40 stock just three years ago.

 

Risk reward favors Bulls at these discounted levels.

 

Only a close below the $4 on a weekly basis would negate this bullish buying premise.

 

 

The Options Way: Unlimited Upside Potential with Limited Risk.

A SPWR long call option can provide the staying power for a market upturn.  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 and strikes.  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 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 large price explosion.

 

Modest stock moves can mean big payoffs in options.

 

Any trade has a fifty/fifty chance of success.  Buying options ITM options increase that probability. 

 

That Delta also approximates the odds that the option will be In The Money at expiration.

 

Buying better options is 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 SPWR trading at $5.35, for example, an In The Money $4.00 strike option currently has $1.35 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.  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 SPWR June $4 Call at $1.60 or less.

 

 

This option strike gives you the right to buy the shares at $4.00 per share,  a price level last seen in 2012 more than four  years ago, with absolutely limited risk.  

 

 

The June option has five months for BULLISH development.  An 89 Delta on this strike means the option will behave much like the stock.

 

 

 
The maximum loss is limited to the $160 or less paid per option contract.    The option upside is unlimited.

 

 

 

The SPWR option trade breakeven is $5.60 at expiration ($4.00 strike plus $1.60 or less option premium). That is less than 25 cents above the current price.

 

A modest move just to the $7.50 midpoint resistance of market movement in the last year of trade is a 100%+ return in the option.  

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