Bonus Options Trade: Play Garmin’s Rebound for Huge Profits
Stocks are surging despite the dire economic situation.
My colleague John Ross and I have been bearish in selecting the Bonus Options trades we send you on Fridays. We’ve recommended put options — betting that the stock will fall — because we’re looking for the next leg down in the stock market.
But it hasn’t happened yet.
While many charts point to more selling, my Quick Hit Profits system has remained bullish since earnings season began.
Earnings reports mark critical moments for many companies. They lift the veil on a company’s performance, and they let us in on how things are going, four times a year.
But the fact these results are not scaring the market is great news.
Today’s trade comes right out of my Quick Hit Profits system with Garmin (Nasdaq: GRMN), the navigation giant.
The stock is showing bullish price action after its latest earnings beat. Now it’s on track for a 15% rally.
And that prospect sets us up for today’s triple-digit opportunity with a call option on the stock.
Garmin Stock Eyes a Breakout in 2020
In my Quick Hit Profits service, we’ve grabbed quick double-digit gains during the current crisis.
And I have more trades going out today for members of my service to continue taking advantage of the stock market environment.
Today, I want to pass a free bonus opportunity on to you.
This stock barely missed the parameters of my research service — but it’s still poised for quick gains in the coming weeks.
Garmin hit what I call my Profit Trigger. That means it not only meets my guidance for entering the stock — I ensure it’s met that guidance multiple times in the past and has generated consistent profits.
I traced the stock’s performance back to 2006.
It hit my Profit Trigger 20 times in the last 14 years. And it has only experienced a loss on five of those occasions.
With 15 profitable trends, it has a 75% win rate. The minimum I like to trade is 70%, so this is well within my range.
The stock simply didn’t see a strong follow-through in price action on the day of earnings. But it doesn’t mean this stock won’t continue higher in the coming weeks.
You can use call options to capitalize on the expected rally.
Based on a breakout to the upside in its price chart, we’re looking for shares to rally 15% to $95 a share.
Garmin Stock Eyes an Uptrend
You can see Garmin is still well below its highs before the coronavirus. But as we have seen, it doesn’t mean shares are heading lower any time soon.
The red trendline is acting as a resistance point, pushing shares lower, while the green trendline is the support level.
The yellow arrow indicates the expected path when the breakout occurs.
But the main premise for this trade is the fact my Quick Hit Profits strategy is triggering bullish trades in this uncertain time.
With Garmin beating analysts’ expectations and seeing its shares rise on the news, we are looking for this uptrend to continue for another month.
Your Trade Setup
To benefit from the expected rally, we can use call options.
Since the expected move is one month, we’ll use the July 17, 2020, expiration date to make sure we have enough time for the move to play out.
The stock is currently trading around $80 a share. We want to use the strike price that is closest to where the stock is trading. For this trade, that’s going to be the $80 call option.
That call option is trading at $5 a share, or $500 a contract. Don’t pay more than $5.50 for it. If shares jump to $98, as expected, you stand to do more than double your money.
Since this is a bonus opportunity, we won’t be updating you on what action to take next. I recommend setting a limit order to sell half at whatever would net you a 50% gain.
For example, if you buy the call option for $5, you can set a limit order to sell half at $7.50.
To help limit downside risk, you can either exit the trade if the stock closes below $78 or when your loss falls below 50%.
Here’s the table with the trade setup:
We Want to Hear From You!
We’d love to hear how your trades are going.
We know it has been a tough environment. But these bonus trades are a great way to benefit from the next move lower. Each one has been a put option. And even though some of them haven’t panned out yet, there’s still room for those positions to bounce back.
Just send us an email at email@example.com and let us know what you think of them.
Chad Shoop, CMT
Editor, Quick Hit Profits
Investing has consumed my life since college. While double majoring in finance and economics at the University of North Carolina at Greensboro, I founded the university’s economics club, joined the finance club and participated in the Chartered Financial Analyst research competition to represent our school.