Option Trade: After This Dow Jones Leader Beat Earnings, Here's How to Get Long Using Options

TL;DR

Procter & Gamble (PG) shares are rising after strong earnings, making it a potential opportunity for bullish investors.

Transcript

[Applause] hey option traders for today's trade we're looking at an option play in dow jones leader procter gamble today's shares moved above the 161 31 buy point of a cup with handle base the move comes after the company posted strong third quarter earnings in the pre-market session shares are trading 2.5 percent higher and currently have a relati... Read More

Key Insights

• 🍵 Procter & Gamble's stock surged above the cup with handle base's buy point following strong Q3 earnings.
• ™️ The suggested option trade is to buy a 165 call with a June 17th expiration, offering uncapped potential gains.
• 😘 The implied volatility of the call option seems low compared to Procter & Gamble's recent volatility.
• 🥡 Investors should consider taking profits if the stock becomes overextended or reaches a price above $168.20.
• 😜 Procter & Gamble has limited growth potential but ranks well in the cosmetics and personal care industry.
• 🤑 Investors new to options should practice with a virtual account before risking real money.
• 🌸 Options are complex, and investors should be aware of the potential for a loss of 100% or more of their investment.

Questions & Answers

Q: What is the suggested option trade for Procter & Gamble (PG) stock?

The suggested option trade is to buy a 165 call with a June 17th expiration. This call option currently costs $3.80, with a maximum loss of $380.

Q: Why is the implied volatility of the call option considered low?

The current implied volatility of 16.5% is considered low relative to Procter & Gamble's realized volatility of 22 over the last 30 trading days. This presents a potentially cheaper option for investors.

Q: When should investors consider taking profits from the long call option?

Investors should consider taking profits if Procter & Gamble shares become overextended or if they reach a price above $168.20. Alternatively, they can hold the contract until expiration for a potential profit.

Q: How does Procter & Gamble's rating and industry standing impact the trade?

Procter & Gamble has a mediocre IBD composite rating of 79 but ranks second in IBD's cosmetics and personal care group. The stock has room for further appreciation if there is a shift to defensive stocks.

Summary & Key Takeaways

• Procter & Gamble's stock has surpassed the cup with handle base's buy point, driven by strong Q3 earnings.

• The suggested option trade is to buy a 165 call with a June 17th expiration, offering uncapped potential gains.

• The implied volatility of the call option appears low, providing an appealing opportunity for investors.