Trade Alert: Lock in a 300% and 50% Gain!

Today is another busy day for us — I have two trades for you and a few updates, so let’s jump right in.

First off, our United Rentals (NYSE: URI) calls keep soaring — and now we’re up a mammoth 332% in about a week. So today, we’re going to move our protective stop-loss orders higher, securing a quick 300% gain on the last half of our trade.

We’re also locking in another nice gain today: We’re raising our stop-loss order on the last half of F5 Networks (Nasdaq: FFIV) to secure a 50% profit since our calls keep climbing. Our calls are up about 77% right now.

After we place those orders, I have a few updates on Monster Beverage (Nasdaq: MNST), which split its shares today (ultimately good news for us), and on two of the trades we made yesterday.

With all that in mind, let’s get to trading…

Secure 300% in United Rentals

First, let’s capture that 300% gain in United Rentals.

After yesterday’s alert, the stock continued to rally, and today it opened up about 1.5%, boosting our January call options.

As part of our strategy to protect our gains, we will once again increase our stop-loss order, which will lock in our triple-digit profits, while allowing the calls to keep on climbing in an uptrend that can last until mid-December.

So we could see even better profits in the days ahead.

Remember, the price for the stop-loss order below is based on our official portfolio entry of $4.56. Be sure to place yours at whatever nets you a 300% gain based on your individual entry price.

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: $18.25
Trade Deadline: Keep this order open until it is filled or canceled.

Lock in 50% in F5 Networks

F5 Networks’ stock has steadily rallied — pushing our options as high as 100% today.

Since shares have pulled back somewhat, we’re currently up around 77%. With that in mind, let’s increase our standing stop-loss order to protect 50% of our gains instead of 10%. (You might recall we already made a quick 50% gain from the first half.)

Remember, the price of the stop-loss order below is based on our official entry of $6.83. You should set your stop-loss order at whatever nets you a 50% gain based on your own entry price.

Here’s your action to take:

Action to Take
Sell Action to Take
Stock: F5 Networks Inc. (FFIV)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $130
Option Symbol: FFIV170120C00130000
Action: Sell to Close
Order Type: Stop-Loss Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $10.25
Trade Deadline: Keep this order open until it is filled or canceled.

If both of those positions keep climbing, I’ll be sure to send you an alert to raise your stop-loss orders once again to capture even greater gains, so keep an eye out.

As for what’s happening elsewhere in the portfolio…

The Monster Stock Split

Monster Beverage posted a 3-for-1 split for its stock today — so we now own the January 2017 $46.67 call options (instead of our original $140 calls).

This stock split means you will own three times the amount of options as before. So if you had one options contract (which covers 100 shares), you now own three options contracts (which cover 300 shares) at the $46.67 strike price. You don’t have to do anything with regard to this change. It’s all done automatically.

This is great news for our call options, even though they are down at the moment.

Most academic studies on the subject have shown splits happen when company management feels confident about its operations. And since this split happened after a weak earnings per share (EPS) was reported for the quarter, it tells me management is still confident and that the weak EPS is probably transitory.

Our calls are down by about 69%, and when our options are down that much, our typical strategy is to institute a 75% stop-loss to preserve capital.

This case is a bit unique, though, and our 75% stop-loss would be right in the middle of the bid/ask prices. That means it would instantly be hit, so I’m not recommending one at this point — mainly because of some research I did this morning.

The last time Monster split its stock right after an EPS report was in August 2005. The stock went down in the first week, but then it rebounded going into weeks three and four, and beyond. To add to that, the last time Monster missed EPS and gapped down in price and then continued falling as the shares have done recently was in 2008 … and, again, by weeks three and four the stock was back above where it first began and continued to move higher.

So here’s what we’re doing: We’re going to suspend our 75% stop-loss in this particular case because history gives us guidance as to what we might see. For now, we’re going to closely monitor this position over the next two weeks to see how shares fare once the news of the EPS miss fades and as news of the split filters through.

Between weeks three and four, we’ll reassess our position. I just want to give this some time to see if the traditional drift uptrend reasserts itself.

Elsewhere in the Portfolio

Our new trade on Garmin (Nasdaq: GRMN) is officially in the portfolio since it traded under my limit price of $2.80 yesterday. As you likely know by now, our official entry price is pulled from the average of the price right after the alert broadcasts and the price an hour later. So our official entry price is $2.70, meaning our limit order price to sell half the position for a 50% gain is set at $4.05. Make sure to set yours at whatever nets you a 50% gain based on your own entry price.

As you know, I need your feedback when entering a trade, so please let me know how this one went for you by filling out the brief survey below.

As for the 75% stop-loss we placed on our Juniper Networks (NYSE: JNPR)December $27 call option to limit our losses, those have yet to be hit. The stock closed higher for the day, and it’s up about 1% today — so this rally should start to trim our losses.

Since our research shows we don’t need to exit this drift pattern until the end of November, we’ll continue to ride it out.

Until next time, good trading…

Jeff Opdyke
Editor, Earnings Drift Alert