3 Top Options Trades for the Week

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options - 3 Top Options Trades for the Week

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The gravity-defying ascent in stocks continued with a vengeance last week. Friday’s 1.18% launch in the S&P 500 was simply the cherry on top. In scanning for the best setups for options trading, I found a handful of bullish candidates.

Today’s best trades trio retreated last week while the market was pushing higher. And while normally such relative weakness is a cause for concern, I’m overlooking it for two reasons.

First, the pullback in these stocks was shallow, suggesting garden variety profit-taking instead of trend-ending distribution. Weakness in this market continues to be aggressively bought up, so I expect this dip to be no different. Second, the retreat is creating a much more attractive (read: lower-risk) entry point than chasing stocks at all-time highs.

No matter how you slice it, today’s selections are ready for some options trading.

3 Top Options Trades for the Week: Tesla Inc (TSLA)

Source: OptionsAnalytix

The recovery in Tesla Inc (NASDAQ:TSLA) shares hit a mild speedbump last week. The three-day swoon delivered a 7% haircut that ushered TSLA back to its rising 20-day and 200-day moving averages. Fortunately, buyers stepped up to defend their turf creating a solid bullish hammer candlestick on Friday.

The rousing reversal confirmed buyers remain in control and it provides an easy pivot to trade around. Indeed, as long as Tesla stock remains above $334 it’s game-on for bulls.

If TSLA can rally above Friday’s high of $344 (it’s currently down pre-market), then buy the March $335/$355 bull call spread for around $9.75.

To minimize the risk if the stock sours, consider exiting on a break of the aforementioned $334 price level.

3 Top Options Trades for the Week: FedEx Corporation (FDX)

Source: OptionsAnalytix

Transportation stocks like FedEx Corporation (NYSE:FDX) have been big winners during the latest stage of our bull market. FDX stock is up some 23% in the past two months alone. Its ascent has had very few pullbacks which make last week’s retreat all the more enticing. Like Tesla stock, FDX experienced a three-day dip to its rising 20-day moving average that was halted by Friday’s bullish hammer candle.

Unlike TSLA, however, FedEx is sitting a stone’s throw from all-time highs and has little by way of overhead resistance. And that makes it ripe for some options trading. If you’re willing to wager FDX stock remains above $250 for the next month then sell the March $250/$240 bull put spread for around $1.

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To minimize the damage if wrong, close the position on a break below the 50-day moving average at $246.50.

3 Top Options Trades for the Week: Nordstrom, Inc. (JWN)

Source: OptionsAnalytix

For our final selection, we’re moving to retail. Nordstrom, Inc. (NYSE:JWN) has done a valiant job in getting off the mat over the past two months. Its breakout over $50 resistance was most impressive and suggests this uptrend has the mustard to go the distance.

Last week’s profit-taking is causing a retest of the $50 zone. And if Friday’s reversal candle is any indication, it appears old resistance is indeed becoming new support.

Buy the JWN March $50/$55 bull call spread for $2. The risk is limited to the initial $2 cost and the reward is limited to $3.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.


Article printed from InvestorPlace Media, https://investorplace.com/2018/01/3-top-options-trades-for-the-week/.

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