Trade Breakdown: First Win of the Year With AVGO

Jack Carter | January 8, 2024

We landed our first win of the year this past week with a stock that I absolutely love to use: AVGO.

I like to use AVGO because this stock lets us go far out of the money and still collect a healthy premium.

As we do every week, we entered this trade on Tuesday and by Friday (just 3 days in the market) we were walking away with the full premium we collected at the onset of the trade.

Read on to see how we played it.

Overview

This trade was a bear call spread.

It’s a type of trade where we sell an out-of-the-money call option, with the knowledge that the stock has a very low chance of going higher than it currently is.

We then buy a call option one strike price higher as a “backup”. In the rare instance that the stock makes a move that we weren’t expecting, this “backup” dramatically limits our losses.

By placing this kind of trade, we are able to instantly collect a set amount of cash, which is called “premium”.

The Trade

As with all of the trades in this strategy, we entered this trade on Tuesday, January 2nd. The first trading day of the year.

The spread had an expiration of Friday, January 5th, so we were only in the trade for a total of 3 days.

Here’s the details of the spread:

  • Sell to open AVGO 1145 Call
  • Buy to open AVGO 1150 Call

At the time, we placed this trade, AVGO was trading around $1095.

But my TrendPoint software told me that AVGO was going to be headed lower…

So I was able to confidently place this trade, knowing that there was a very good chance I would never have to deliver on that 1145 Call that I was selling.

How It Worked Out

As with most of these trades, we won this one.

AVGO dropped all week:

And with each day that it dropped further, it was more and more likely and we would be able to walk away from the trade on Friday and keep the full premium we collected on the trade.

It’s not magic. It’s just because we’re increasing the “target size”.

See, when you place a directional trade, (for example when you buy a stock or a call option), the stock has to make a significant upward move for you to make any money.

But with this kind of trade I use in this strategy, the stock can go up, down or sideways… as long as it doesn’t move significantly in the direction of the option we sold, we’re out of the trade in 3 days.

You can see why I love to trade this way. I don’t have to be a super genius. I just let time do the heavy lifting and in 3 days I’m out of the trade, having kept the full cash payment that I collected when I entered the trade.

If you want to join me on my next trade, I just recorded this video for you where I reveal more details about this insanely good strategy.

Trade well,

Jack Carter

Trending Stocks of the Week — Jan 8, 2024

Jack Carter | January 8, 2024

To help you discover the power of trends, every week, every week, I share with you a handful of the top trending stocks.

These stocks are picked by the custom-built TrendPoint software I designed to pick the strongest trending stocks in the market right now.

If you know anything about me, you know that every trade I get into starts with a trending stock.

Unless a stock is in a strong trend, I don’t want to hear about it. In my book, wishy washy stocks are the quickest way to losing money.

This Week’s Stocks

Hope you enjoyed your holiday break — and welcome to 2024!

This week I’ve got 3 bullish picks for you to go long on.

Remember, we always trade in the same direction as the broad market.

  • COF
  • JPM
  • HIG

And don’t forget about last week’s picks, which you can find here.

This week’s stocks show a strong trend and could still be in play for the next few weeks.

What can you do with these stocks?

Well, there are a couple of things you could consider — after doing your own research, of course:

  1. You could just buy the stock. This is probably the simplest thing you could do. Then just wait for it to go up and sell when you hit a profit target you’re comfortable with.
  2. You could buy an option. You know I’m not a fan of speculative plays, but every once in a while it doesn’t hurt to throw a little cash at a speculative option. Of course, while options can move bigtime if the stock goes up… the downside of options is that you have a time limit on how quickly you need the stock to make that move.
  3. You could do an income play. If you’ve been following me for any length of time, you know that I’m a big fan of income plays, because they increase your odds of winning. We do this by SELLING options instead of buying them. If you haven’t tried your hand at income trading yet, I urge you to try this exercise for yourself.

    Without risking any money, it will really let you see the power of income trading and why it’s my favorite method.

    Whether you end up doing naked puts, covered calls or some kind of spread, this is really my preferred method to use when I’ve found a great trending stock like the ones on this week’s list.

That’s it for now.

Stay tuned, because I’ll be sending you a new list of TrendPoint Best Trending Stocks every week! (usually Mondays)

Trade well,

Jack Carter

P.S. Every single week, I use one strategy to pull income from the markets. Click here to check it out.