Trade Alert: A 200% Gain in a Week

Wow — what a presidential election, and what a day for our portfolio.

Considering the recent market volatility in the wake of Election Day, I have three actions for you to take today: a new buy, a trade to lock in a 200% gain and another trade to limit losses.

Let’s start with locking in that nice triple-digit gain, which we’re grabbing in United Rentals (NYSE: URI), the equipment and tool rental company. As the market attempts to figure out what President-elect Donald Trump means for the economy, this stock has soared — lighting a fire under the uptrend our January calls are capturing.

That means our calls are up a whopping 237% — in just a week’s time.

We locked in half of our position for a 50% gain two days ago, allowing this other half to ride — and it’s clearly working out well for us.

I want to make sure we don’t lose these gains, so we’re going to adjust our current stop-loss order higher to secure a 200% gain. This will protect our profits, while allowing the calls to continue climbing.

Keep in mind that the trade directions below are based on our official entry price of $4.56. So be sure to place your stop-loss order at whatever price nets you a 200% gain based on your individual entry price — and remember to use a stop-loss order. Otherwise, your trade could be triggered right away, and we want to ride this rally higher.

Here’s your action to take:

Action to Take
Sell Action to Take
Stock: United Rentals Inc. (URI)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $72.50
Option Symbol: URI170120C00072500
Action: Sell to Close
Order Type: Stop-Loss Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $13.70
Trade Deadline: Keep this order open until it is filled or canceled.

As the calls keep rising, we may adjust this stop-loss order higher.

Now let’s turn to our new profit opportunity…

Today’s New Buy

A couple of weeks ago, I mentioned a company announced earnings and hit our parameters — but we had to wait a bit since the stock usually pulls back after such a strong earnings report. Our research shows that by waiting, we’ll have a better opportunity to enter a call-option position.

Today is that day.

The company is Garmin (Nasdaq: GRMN), an American multinational tech company. It reported earnings on October 26 that topped analyst estimates by nearly 40%, which caused the stock to pop 5% at the open.

When this happens for Garmin specifically, we know it’s best to buy two weeks later and hold it for a couple of months — because that period has a history of delivering gains ranging from 3.5% to more than 20%.

Remember, as with the trade before this one, the limit price for your sell order should be based on your individual entry price. In this case, you want to put in a limit order to sell half of the position for whatever nets you a 50% gain.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: Garmin Ltd. (GRMN)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $47.50
Option Symbol: GRMN170120C00047500
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $2.80
Trade Deadline: If your order is not filled by my next update, I will update you on the trade.
Note: Do not place a market order. Set the limit order at $2.80.
Once this order is filled, place the following order:
Sell Action to Take
Stock: Garmin Ltd. (GRMN)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $47.50
Option Symbol: GRMN170120C00047500
Action: Sell to Close Half
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: Whatever nets you a 50% gain.
Trade Deadline: Keep this order open until it is filled or canceled.
Note: This second order will allow us to collect a 50% gain on half of our position in the event that a quick move happens before I can get a trade alert out to you.

And now for managing one of our open portfolio positions…

Preserve Capital in Juniper

Lastly, we’re going to place a 75% stop-loss on our Juniper Networks (NYSE: JNPR) December $27 call option.

Part of our strategy is to never take a 100% loss on our options, so whenever I see a position approaching the 75% level, I will alert you to place a 75% stop-loss order.

The reason we go with 75% is because options tend to be volatile, and we don’t want to be stopped out of a trade that could possibly turn around for us.

This may mean a 75% loss for us. That smarts, but every trading strategy comes with its occasional losses — it’s simply the nature of the investing beast. Even so, this loss is manageable considering our track record: Our gains, such as the 200% we’re protecting in United Rentals today and the four other gains of 50% or higher, more than offset it.

To place this trade, you may need to first cancel your standing order to sell half the position for a 50% gain. Some brokers won’t allow you to have two orders like this on a position.

Once that’s canceled, place the following trade. As before, just remember that this price is based on the portfolio’s official entry price. You should place your stop-loss order at a price that will trigger at a 75% loss based on your individual entry price.

Here’s the action to take:

Action to Take
Sell Action to Take
Stock: Juniper Networks Inc. (JNPR)
Option Type: Call Option
Expiration: Dec-16-2016
Strike Price: $27
Option Symbol: JNPR161216C00027000
Action: Sell to Close
Order Type: Stop-Loss Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $0.20
Trade Deadline: Keep this order open until it is filled or canceled.

That’s all for now. I expect the markets to remain volatile in the coming weeks, so I will update you accordingly as the market shifts. Overall though, our trends should remain intact.

Our extensive research shows that the earnings trends we’ve isolated are incredibly consistent — as we’ve seen from our recent string of winners.

Until next time, good trading…

Jeff Opdyke
Editor, Earnings Drift Alert