Option Trade: After This Dow Jones Leader Beat Earnings, Here's How to Get Long Using Options | Summary and Q&A

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April 20, 2022
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Investor's Business Daily
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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.

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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.

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