Trade Alert: Time to Buy Calls on United Rentals

We’re in the middle of earnings season, so the new trades keep rolling in. Already, I have another buy recommendation for you today.

But before we get to that, a quick update on yesterday’s trade: We bought January $47 calls on Archer-Daniels Midland (NYSE: ADM)— and we’re officially tracking the position in the portfolio. For our entry price, we picked the average between the option price right after the alert broadcast and the price an hour after that. So while your own price may differ slightly, our official entry price for ADM is $1.88. And the position is already up a nice 22% in one day!

I’ll be sure to keep you updated, especially as it nears the 50% mark.

As for our new opportunity today…

Our United Rentals Trade Is Ready

As I mentioned a couple weeks ago, a trade was triggered for United Rentals Inc. (NYSE: URI), an equipment and tool rental company. We just had to wait a little for the perfect moment to get in.

After the company reported third-quarter earnings on October 19 that topped analysts’ expectations by more than 5%, leading shares to open higher by nearly 6% the next day — we knew that we should grab call options two weeks later.

See, our research on how the stock reacts to a particular type of earnings announcement shows that United Rentals performs best for traders when they wait two weeks after the report to act. Our historical data also shows that we’ll reap the strongest gains by holding the position for about a month and a half. Most of the time, the stock rallies during that period — anywhere from 1%
to 60%. With options, we can certainly magnify those gains.

Today marks two weeks since the company announced earnings, so it’s time to grab those call options.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: United Rentals Inc. (URI)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $72.50
Option Symbol: URI170120C00072500
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $5.20
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 $5.20.
Once this order is filled, place the following order:
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 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.

We have about 10 other companies reporting earnings this week, so stay tuned. We may have more trading in store for us this week.

Talk to you again soon.

Until next time, good trading…

Jeff Opdyke
Editor, Earnings Drift Alert