| 102.4% Profit Potential for Zillow Trade |
Dear Reader,
On Friday, we looked at a daily price chart for Logitech Intl S. A. noting the stock's 12/26 Day MACD was trading above the 9 Day EMA.
For today's Trade of the Day e-letter we will be looking at a daily price chart for Zillow Group, Inc. stock symbol: Z.
Before breaking down Z's daily chart let's first review what products and services the company offers.
Zillow Group, Inc. operates real estate brands on mobile and the web in the United States. It operates through three segments: Homes; Internet, Media & Technology; and Mortgages. The company's platform offers buying, selling, renting, and financing services for residential real estate.
Now, let's begin to break down the Daily Price chart for Z stock.
Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for Zillow Group Inc. |
50-Day EMA and 100-Day EMA 'Buy' Signal
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The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving.
• 50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal
• 50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal
When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the stock's buying pressure has begun to outweigh the selling pressure signaling a 'buy' signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a 'sell' signal.
As the chart shows, on May 11th, the Z 50-Day EMA, crossed above the 100-Day EMA.
This crossover indicated the buying pressure for Z stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend.
Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the 'buy' signal is still in play.
As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs in the coming days and weeks.
Our price target for Z is 111.40 per share. |
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| | Profit if Z is Up, Down or Flat
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Now, since Z's 50-Day EMA is above the 100-Day EMA meaning the stock is on a buy signal, let's use the Hughes Optioneering calculator to look at the potential returns for a Z call option spread.
The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 10.0% increase to a 10.0% decrease in Z at option expiration.
The goal of this example is to demonstrate the 'built in' profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don't list the option strike prices used in the profit/loss calculation.
The prices and returns represented below were calculated based on the current stock and option pricing for Z on 9/25/2020 before commissions.
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Built in Profit Potential
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For this option spread, the calculator analysis below reveals the cost of the spread is $247 (circled). The maximum risk for an option spread is the cost of the spread.
The analysis reveals that if Z is flat or up at all at expiration the spread will realize a 102.4% return (circled).
And if Z decreases 10.0% at option expiration, the option spread would make a 102.4% return (circled).
Due to option pricing characteristics, this option spread has a 'built in' 102.4% profit potential when the trade was initiated.
Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.
A higher percentage of winning trades can give you the discipline needed to become a successful trader.
The Hughes Optioneering Team is here to help you identify winning trades just like this one.
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Trade High Priced Stocks for $350 With Less Risk |
One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, or Netflix for as little as $350. With an option spread you can control 100 shares of Google for $350. If you were to purchase 100 shares of Google at current prices it would cost about $142,000. With the stock purchase you are risking $142,000 but with a Google option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases. |
Chuck's Weekly Option Alert Trading Service |
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| You can start receiving hand-picked trades from Chuck today!
Chuck is offering special pricing for his Weekly Option Alert Trading Service for Trade of the Day subscribers.
Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join and use the code "Optioneering VIP" to receive special pricing! |
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Wishing You the Best in Investing Success,
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| | Chuck Hughes Editor, Trade of The Day
Have any questions? Email us at dailytrade@chuckstod.com |
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| | Learn more about this Option Secret Here |
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