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Trade of the Day: On Assignment (ASGN)

On Assignment is showing bullish signals


While buying strong companies on strength is generally a good idea, figuring out solid bets in the options game is not quite so clear-cut. That’s why I have my Power Options system to run multiple regression analysis and other statistical tools that unearth the few stocks that are building momentum and set to make a quick burst.

According to my Power Options system, employment recruiting company On Assignment (NYSE:ASGN) is poised to make a jump. Trades from my scanners generally play out within three weeks (if they don’t, I exit the trade to capture the time value left), so the fact that it’s reporting earnings on April 22 shouldn’t throw a wrench into things.

Recommendation: Buy ASGN June 30 call options at 55 cents or lower, when the stock price is at $25.70. After entry, take profits if the stock price hits $28.20 or the option price reaches $1.40. Exit if the stock price closes below $24.40 or the option price falls to 30 cents.

A lot of people are wary of out of the money options, but my recommendations are usually OTM options. Not only are the options undervalued, but they’re also cheap. The profit can be made with the option still out of the money due to the large amount of time value still remaining in the option. The time value tends to increase as the option nears the strike price. There’s no need to hold these options until expiration.

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