Trade Summary: September 6, 2016

| September 6, 2016

September 6, 2016

 

Trade Rationale

With September finally here, we can start to expect a little more action in the markets.  While there’s never any guarantees when it comes to stocks, September has always been the most volatile month from a historical perspective.  As such, picking the right trades becomes even more crucial.

This week, our theme is going to be focused on strong fundamentals.  The best, fundamentally sound companies tend to be the best picks during times of higher volatility.  Conversely, less fundamentally sound companies typically sell off first during periods of uncertainty.

We’re going to grab calls in two companies with strong fundamentals and buy puts in a company with more questionable metrics.

First off, let’s buy calls in Dollar Tree (DLTR).  The discount retail store has seen its share price drop substantially after missing earnings last quarter.  However, the company has solid fundamentals across the board and is sure to pick up buyers again soon.

The next company to look at is Glu Mobile (GLUU).  The mobile software company may not seem like the type to be strong fundamentally, but the company has a great balance sheet and strong margins.  I believe the stock is due for a new upward trend.

On the other hand, let’s buy puts on Inuit (INTU).  The software company, most famous for QuickBooks, looks decent on the surface.  However, looking at several key ratios, the stock is certainly overvalued at the current price.  If we see any broad market selling, INTU is sure to be one of the harder hit due to its high valuation.

 

Trade Details

#1) Buy Dollar Tree (DLTR) October 21st 85 Calls up to $1.80

For this trade, we’re looking for a move higher in DLTR.  Our first profit point for conservative traders is at $87.50.  For aggressive traders, you can hold up to $90.  For risk control, the conservative exit level is $80.  Lastly, $78 is the final exit level for aggressive traders.

Dollar Tree

#2) Buy Glu Mobile (GLUU) December 16th 2.50 Calls up to $0.40

With this trade, we’re also looking for the stock to climb.  Our first exit point for conservative traders is at $3.00.  For aggressive traders, you can hold to $3.50.  For risk control, the conservative exit level is $2.00.  And, $1.75 is the final exit level for aggressive traders.

Glu Mobile

#3) Buy Intuit (INTU) October 21st 105 Puts up to $1.35

Finally, we’re looking for a down move in INTU.  Our first profit-taking exit point for conservative traders is at $107.50.  For aggressive traders, you can hold to $102.50.  For risk control, the conservative exit level is $116.  $118 is the final exit point for aggressive traders.

Intuit

 

Category: AOA Trade Summary

Comments are closed.