Hey Traders,
Two weeks ago, I highlighted EAT (Brinker International) as a trending stock worth watching.
It was trading well above its key moving averages, showing resilience even as the broader market wobbled.
We talked about three different ways to trade EAT, and now that we’re at the end of this week, let’s break down how those setups would’ve worked out.
First, a Quick Recap
On January 6, EAT started the day around $141.81, dipped as low as $138.17, and ended the day at $140.80.
From there, the stock gently pulled back toward its 20-day moving average, touching it on January 8 when it got as low as $133.73.
While that was below the $135 put in one of our examples, the contract had over a month to expiration, meaning it was highly unlikely you’d have been assigned the stock.
Since then, EAT has bounced back, rising to a high of $147.65 before settling at around $144.71 as I write this.
Let’s look at how the three example trades performed.
1. Covered Call
- Trade Setup: Buy 100 shares of EAT at $140.40 and sell the $150 strike call expiring January 17 for $1.10.
- Outcome: As of today, EAT hasn’t hit $150, so the call will expire worthless, and you keep the full $1.10 premium. Plus, you still own the 100 shares of EAT, which are now worth $144.71, giving you an unrealized gain of $4.31 per share.
- Why it works:
Your cost basis is now $139.30 ($140.40 minus the $1.10 premium), and you’re free to sell another covered call on Monday to rinse and repeat the process. You’re winning on both ends — cost continues coming down while the stock keeps appreciating!
2. Naked Put
- Trade Setup: Sell the $135 put expiring February 21 for $7.00.
- Outcome: EAT briefly dipped below $135 on January 8 but quickly bounced back. Today, the stock is trading at $144.71, and the $135 put is worth about $4.40.
If you wanted to close the trade early, you could buy the put back for $4.40, locking in a profit of $2.60 per share ($260 per contract) in less than two weeks.
Or, if you hold the trade to expiration and EAT stays above $135, the put will expire worthless, and you’ll keep the full $7 premium. - Why it works: You’re earning income just for promising to buy the stock at a price you’d be happy to own it. If EAT keeps trending higher, that promise never gets called in, and you keep the premium you collected for making that promise.
3. Bull Put Credit Spread
- Trade Setup: Sell the $135 put and buy the $130 put, both expiring January 17, for a net credit of $0.97.
- Outcome: Today’s price action means EAT is safely above $135, so when the spread expires worthless, as we expect it will, you keep the full $0.97 premium. That’s a 19.4% return on risk in just under two weeks!
- Why it works: This is a high-probability way to trade trending stocks with limited risk. Even if EAT had dipped closer to $135, the trade still offered a solid chance of success.
Final Thoughts
This is exactly why I love trading strong, trending stocks like EAT. Even with the market turbulence we’ve seen lately, EAT stayed resilient, bouncing right off its key trendlines and rewarding traders who stayed disciplined.
Whether you’re selling covered calls, selling naked puts, or using credit spreads, the high-probability way we trade these setups stacks the odds in our favor.
And the best part? These trades don’t require big, flashy moves to generate consistent returns. We’re just riding the trends and letting the market work for us.
So as you head into next week, keep looking for those strong stocks and remember to stick to your plan.
Trade well,
Jack Carter
P.S. Before you buy NVDA — STOP and watch this! The “New A.I. Stocks” for 2025 are here and they’re hot!
