3 Stocks to Trade Now for New Year’s Profits

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stocks to trade - 3 Stocks to Trade Now for New Year’s Profits

Source: Craig Lloyd via Flickr (Modified)

Wall Street has been fretting about whether the Federal Reserve will raise rates a second time. The consensus on this matter has flip flopped from one extreme conviction to another, taking markets markets by the ear each time.

3 Stocks to Trade for Profits in 2017

Up until last week, markets lacked volatility. We’d gone too long without a 1% market move. But the 2% moves of the past few days have been wild enough to bury the meme.

Next week, we will find out if September will include a rate hike or not. If the Fed delays the hike yet again, we’ll probably see a relief rally. Unless Chairwoman Janet Yellen changes the Fed’s policy and its 2017 targets, though, the rally should be temporary (as most relief rallies are). So we can continue to trade the overall meander, which should linger for a few more months.

Here are three mid-term trade setups that should work through year-end, even if we do get a tiny rate hike.

Stocks to Trade for 2017: Apple (AAPL)

Apple stock chart AAPL
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There is no denying the value of Apple Inc. (NASDAQ:AAPL). This week’s price action solidified it as a gem that traders are eager to buy.

This current rally in AAPL stock makes it more difficult to retest the lows of May and June of this year, so I can be more confident placing bullish options spreads — especially if paired with bearish spreads into January.

The trade: Sell a Jan $100/$95 credit put spread for 72 cents per contract. This has an 85% theoretical chance of success and a 16% potential yield on risk. I can sell a Jan $130/$135 credit call spread, for 60 cents per contract, against this trade. This has an 80% theoretical chance of success and a 13% potential yield.

Taking both sets up an iron condor, for which I collect $1.32 per contract.

If AAPL stock stays between $100 and $130 per share through January, this trade would yield 30% on money risked. Breakeven points are $98.68 and $131.32 per share.

Stocks to Trade for 2017: Biogen (BIIB)

Biogen stock chart BIIB
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Biogen Inc (NASDAQ:BIIB) is a well-run pharmaceutical company whose stock has seen tremendous volatility of late. Technically, BIIB stock is at about midpoint of its three-year range.

The recent spike in the CBOE Volatility Index (VIX) makes it possible to find far enough levels against which I can cautiously sell risk for income.

The trade: Sell the January BIIB short strangle for a total of $5 in premium per contract. The bullish side is to sell the Jan $190 put for $1.70 per contract. This has a 90%-plus theoretical chance of success and a price buffer of 36% from current price. The bearish side is to sell the Jan $390 call for $3.3 per contract. This has an 85% theoretical chance of success. Buffer from current price is 30%.

The breakeven points for this iron condor are $185 per share on the downside and $395 per share on the upside.

Stocks to Trade for 2017: Toll Brothers (TOL)

TOL Stock Chart
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Since the 2008 financial debacle, real estate has made an incredible comeback thanks to record low interest rates. The threat of higher rates may have pulled sales forward. I also see signs of bubble-like behavior.

For this, I want to take a bearish trade on Toll Brothers Inc (NYSE:TOL).

Technically, TOL stock convincingly failed to breakout of the $31 pivot area. I want to capture a potential breach of the ascending higher low trend.

The trade: Buy the TOL Jan $28 put for $1.40 per contract. Ideally, I need TOL stock to fall below my level before mid January. I will have a stop-loss, but not a tight one.

It is important to note that I only sell naked puts if I am willing and able to buy the underlying shares at the strike price sold. Equally as important is to know that I am not obliged to hold any of these trades through their expiration dates. I can close any of them at any time for partial gains or losses.

Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and StockTwits at @racernic.

Nicolas Chahine is the managing director of SellSpreads.com.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/3-stocks-to-trade-new-year-aapl-biib-tol/.

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