A strategy idea for options trading investors.
Dillard’s Inc. (NYSE: DDS) is in the apparel and home furnishings business. And, lately, they are on a tear. This has been a very bullishly trending stock basically all year. The trend doesn’t show any signs of stopping.
DDS is above its 200-, 50-, and even 15-day moving average. It’s got a high relative strength index at 68.5. And its Average Directional Index (ADX) is strong as well, sitting at 52.5.
A nice way to play this move is with a good old-fashioned long call. The DDS August 60 Calls provide leverage along with protection. These are a good play at 3.70 or better. If DDS heads lower, risk is limited to the 3.70 price tag on the trade. However, if DDS heads up, the 50 delta of the calls means a highly leveraged profit on this low-cost-of-entry play.
This trade is somewhat speculative and should be traded small, but the risk-reward of the trade is among the best out there at this time.
Dan Passarelli of MarketTaker.com writes the Market Taker Edge options newsletter. Dan has more than 17 years’ experience in the options industry as a market maker, Options Institute instructor and author of “Trading Option Greeks.”