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Long Calls – Phillips 66 (PSX)

Jump back into trading with PSX calls


The Easter break is over for the market and now it’s time to get back to work. But for many stocks, they have ignored this channeling market and have been forging ahead. Here is a simple and straightforward trade idea on a stock that shows no signs of running out of gas anytime soon.

Phillips 66 (NYSE:PSX): Long Calls

The trade: Buy the May 70 calls for $2.90 or less.

The strategy: The long call strategy is generally used for a bullish outlook. The trade can profit if the stock rises and the call premium increases to an amount more than was paid. Maximum profit is unlimited because PSX can continue to rise and the maximum loss is $2.90 or whatever was paid if PSX finishes below $70 at May expiration. Breakeven is $72.90 at expiration based on a cost of $2.90.

The rationale: Phillips 66 is a well regarded energy stock compared to its peers. It generally has higher margins and a strong return-on-equity compared to many energy companies. Those facts have not been lost on investors if you look at the stock’s chart. Since the inception of PSX back in April 2012, the stock has been in a pretty solid uptrend. The stock has basically doubled in a year. That’s all well and good but what does the chart look like now?

PSX just broke above a minor resistance area ($68) on Wednesday and the stock continued higher on Thursday which signifies a break over resistance. The stock may temporarily pullback a day or two before attempting to move higher but without any resistance overhead, there is no telling how high this stock can move. Traders might want to fill ‘er up with calls on 66!

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