Instead of back-and-forth trading triggered by higher interest rates and inflation risks, traders are enjoying a slightly calmer market this week.
The average true range on the S&P 500 has not reached the low levels it set in December and January, but it has continued to fall from its peaks of volatility on March 9th.
Because the energy market has been so negative, we don’t expect a breakout yet.
However, flat trading is perfectly fine for selling options for more income.
We are still confident in the intermediate term that Chegg (NYSE:CHGG) will perform well and rise back above $100 per share, where we were “put” the stock last week.
Positive news about economic growth should be more than enough to offset any concerns about the impact of students going back to school.
However, the move higher may still take a little time to begin gathering momentum.
Therefore, we recommend selling calls against CHGG stock to generate some solid option premium.
To take advantage of this calm in the market, we recommend selling to open a CHGG covered call with a mid-April expiration and a strike price near short-term resistance.
While we are still bullish on CHGG stock in the longer term, we anticipate that CHGG will remain below the strike price by our mid-April expiration, which would allow us to keep the entire premium we receive for selling this covered call.
On the date of publication, John Jagerson & Wade Hansen did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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