Options for stock investors. A better way to trade.

TRANSOCEAN Trade Alert – Buy January 2020 $5 Call @$3.75 or less

DRILLING UP TRANSOCEAN

 

New Trade Alert for (RIG)

 

Transocean January 2020 $5.00 Call @$3.75 or less


 

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

Above Break Even Probability: 41%

Maximum Loss Probability: 20%


Bounce from the bottom has Crude climbing with the $60 midpoint price pivot up above.  

 

Recent lows did not see new highs in volatility to tell us that sellers may be tired.

 

 

 

A low priced stock that was a 75% Bulls Eye Option winner last year presents long term value opportunity.

 

Forgotten in this fact has Transocean left for nearly dead on a drop from over $100 per share.  

 

 

 

Transocean has tracked from $8 to $9 for over a month with $10 the first target on a breakout of this bottom range.

 

The RIG June 21st bottom at $7.67 coincides with the February 2016 low. 

 

Risk reward favors Bulls at these discounted levels.

 

 

The Options Way: Unlimited Upside Potential with Limited Risk.



A RIG 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.

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.

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 RIG trading at $8.30, for example, an In The Money $5.00 strike option currently has $3.30 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 RIG January 2020 $5 Call at $3.75 or less.

This option strike gives you the right to buy the shares at $5.00 per share,  a price level not seen in the last 20 plus years, with absolutely limited risk.  

The January option has nearly ONE YEAR for BULLISH development.  A 90 Delta on this strike means the option will behave much like the stock.

 

NOTE THIS 2019 OPTION HAS 344 DAYS UNTIL EXPIRATION. 

 


 
The maximum loss is limited to the $375 or less paid per option contract.   

The option upside is unlimited.

 

The RIG option trade break even is $8.75 at expiration ($5.00 strike plus $3.75 or less option premium). That is 50 cents above the current price.

 

 

Best,

Alan Knuckman
BullsEyeOption.com
alanknuckman@bullseyeoption.com


 

DISCLAIMER:

 

An option buyer runs the risk of losing the entire amount paid for the option in a relatively short time. The risk of writing options is substantial and may incur large losses. The writer of an uncovered call forgoes the opportunity to benefit from an increase in the value of the underlying interest above the option price, but continues to bear the risk of a decline in value of the underlying interest. Strategies using combinations of positions, such as spread and straddle positions may be as risky as taking a simple long or short positions. This brief statement cannot disclose all the risks and other significant aspects of trading options. You should carefully study and consider whether such trading is suitable for you in light of your circumstances and financial resources before you trade.

 

SIMULATED OR HYPOTHETICAL PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS SHOWN IN AN ACTUAL PERFORMANCE RECORD, SUCH RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, BECAUSE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED OR HYPOTHETICAL PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. Past performance is not necessarily indicative of future performance. This brief statement cannot disclose all the risks and other significant aspects of trading. You should carefully study trading and consider whether such activity is suitable for you in light of your circumstances and financial resources before you trade.

 

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