While the market has been experiencing more volatility than most have anticipated, this action always shakes out the weaker hands. It is also why I have recommended longer-term options trading strategies and tight stops to protect profits for my Momentum Options members.
This year is feeling a lot like 2008 when volatility was through the roof. Commodities, currencies and the market were making wild price swings. While others are feeling unsteady, I love this type of action for options trading. One sector that I like to scour for new trading ideas is hotels.
The hotel industry is largely tied to the business economy and the simple fact of whether consumers are eating and traveling. With gas prices so low, consumers now have additional money in their pockets and are more willing to travel when it doesn’t cost triple digits to fill up the tank.
I recently opened a bullish trade in Hilton Worldwide Holdings Inc (NYSE:HLT). With hotels, the key metrics are occupancy rates and RevPAR (revenue per available room). In 2013, Hilton’s occupancy rate was 72.3%, and we’ll get the 2014 figures when the company reports earnings again sometime near the end of February or early March.
What I really like about HLT, though, are its bullish technicals and what that could mean for options trading.
If HLT shares can close above $26, this should get fresh all-time highs in play. The 52-week high is $26.53, and a close above this level should lead to blue-sky territory. Support for HLT is at $25.50 and the 50-day moving average.
I’m making a bet that HLT will make a run past $30 again, and the best way to play it is with options trading.
Buy the HLT April 29 calls at current levels (which are around 35 cents).
My exit target for the calls is 80 cents, or more than 100%. I typically don’t place stop losses on options below 50 cents because they can be very volatile (especially in this market), so no stop loss for the options at this time. I’ll be watching to make sure that HLT stock stays above support at $25.50.
Whether you’re new to options or have years of experience, the tips Rick will share can help you lock in bigger gains, find new winning ideas, wring the risk out of your trades and become a more confident and successful options investor. Click here now to download your FREE copy of The 5 Golden Rules of Options Investing.
