The Signal. By Safe Option Strategies. Trade Explanation of the Bull Put Spread. Adobe Systems, Inc. (ADBE) Bull Put Spread. The Safe Option Strategy

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Alaina Blair
5 years ago
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19 Credit BTO Oct15 $75.00 Strike Puts - $0.48Debit Total Credit $0.71Per Share Max Risk is $4.29 Per share Limit Credit Order of $0.

1 September 21, 2015 The best weekly newsletter for the serious options trader. The Signal By Safe Option Strategies The Safe Option Strategy Adobe Systems, Inc. (ADBE) Bull Put Spread The Safe Option Strategy STO Oct15 $80.00 Strike Puts - $1.19 Credit BTO Oct15 $75.00 Strike Puts - $0.48Debit Total Credit $0.71Per Share Max Risk is $4.29 Per share Limit Credit Order of $0.70 to open the trade Target ROI is 15% Max ROI 17% Target time in trade is <25 days Trade Explanation of the Bull Put Spread Click on the link above to see the definition of the spread trade.

2 Company Technical s Summary This last earnings report for ADBE was as close to a home run as you get in the markets. Only Friday s overall market move prevented a gap up, but today made up for that missing component. There is strong support now at $80 per share, and nothing on the horizon that should slow this company down. subscribers own potential risk.2

3 The Primary Exit Plan The primary exit for this trade is to let both options expire worthless at options expiration. If this happens, we book our max profit on the trade ($0.71 per share in this case). If the stock price moves up strong in the next week and we can get out ahead of expiration with half or more of our target profit we will do so. Adjustment for Bearish Trend If the stock price were to move bearish, there are several ways to adjust the trade: 1) We could allow stock to be put to us for $80.00 per share (our short put strike price). We would also roll our long puts out in expiration, and possibly to a strike price one or two strikes lower. Then we would add short calls (strike and month to be determined based on where the stock price is trading when this actually happens) and we would be in a perfect collar trade. 2) We could try to exit the trade by buying to close our short puts at our theoretical breakeven point. This is the strike price of the short puts minus the total net credit in the trade ($79.30 in this case). If we do this, we would then sell the long puts for whatever value they still have and possibly book some profit in the process. 3) The last choice would be to roll the whole trade out in time and down in strike prices, but this is a tricky adjustment, and one we would not likely do on this trade. Trade Updates subscribers own potential risk.3

4 NFLX Bear Put Calendar (09/14) - After getting filled in this trade, the markets took a turn to the bullish side, and the trade was moving against us. Friday, and today s move down, have kept the trend bearish. No adjustment today. It would be premature. BBY ITM Bull Call (09/14) This trade opened as expected, and then trended very slightly against us. However, it is still technically bullish and therefore, does not need to be adjusted right now. UA Bull Call Calendar (09/07) We are profitable on this trade, but only slightly. No change today. HD Put Calendar (8/31) We are trading at a slight profit as of today s close. It is not enough to close the trade, but it is looking good. No change today. NVDA Bull Put (8/10) Full profit was reached when NVDA closed Friday above our $23 short put strike price. Great trade for 22% ROR. RHT Bull Call (6/21) The trade closed on Friday for about a $1.00 per share net loss. Depending on fill prices, we have had students report from between break even, to $1.25/share loss. About 20% down on this trade. CAT Butterfly (6/07) CAT is well collared and looking good. No changes today. Watch for the Signals Signals to Watch for in the Upcoming Week and Why. Economic Reports subscribers own potential risk.4

5 Sep 21 Existing Home Sales Aug Sep 22 FHFA Housing Price Index Jul Sep 23 MBA Mortgage Index 09/19 Sep 23 Crude Inventories 09/19 Sep 24 Initial Claims 09/19 Sep 24 Continuing Claims 09/12 Sep 24 Durable Orders Aug Sep 24 Durable Goods ex transportation Aug Sep 24 New Home Sales Aug Sep 24 Natural Gas Inventories 09/19 Sep 25 GDP - Third Estimate Q2 Sep 25 GDP Deflator - Third Estimate Q2 Sep 25 Michigan Sentiment - Final Sep Watch the Reports Existing Home Sales Existing home sales declined 4.8% in August to 5.31 mln seasonally adjusted annual rate (SAAR) from a downwardly revised 5.58 mln SAAR (from 5.59 mln) in July. The Briefing.com Consensus expected sales to fall to 5.50 mln SAAR. The overall story in the housing market remains the same. Tight supplies and relatively high prices have cut into both demand and affordability conditions. Unless price growth softens or an influx of inventories give buyers more options, sales growth will suffer. Still, underlying demand trends aren t terrible. Even though sales in August were the lowest since April, the drop came immediately after a month where sales rose to their highest point since February That suggests the move was likely normal volatility rather than a big shift in trends. Furthermore, first-time homebuyers accounted for 32% of all sales in August, up from 28% in July and 29% in August These buyers are the lifeblood of a normal marketplace, and the return from a depressed July also signals that trends remain firm. Finally, all-cash sales dipped to 22% of all sales in August, down from 23% in July. Sales to individual investors accounted for 12% of sales, down from 13% in July. This suggests that a greater portion of buyers are actually living in the home. Distressed sales accounted for 7% of all sales for a second consecutive month in August. That was the lowest level of distressed demand since that National Association of Realtors began tracking the data. Weak affordability conditions have the potential to lead to a slowdown in sales in coming months, particularly if mortgage rates rise. On the latter note, the National Association of Realtors suggested the prospect of higher mortgage rates and home prices have likely been factors in the recent strength, implying that some demand has been pulled forward. Initial and Continuing Claims The initial claims level declined to 264,000 for the week ending September 12 from an unrevised 275,000 for the week ending September 5. The Briefing.com Consensus expected the initial claims level to remain at 275,000. The continuing claims level decreased to mln for the week ending September 5 from an upwardly revised mln (from mln) for the week ending August 29. The consensus expected the continuing claims level to fall to mln. Over the past four weeks, the initial claims level has averaged 272,500, and weekly volatility has been minimal. These are signs of a stable and strong labor market. subscribers own potential risk.5

6 The overall trend in claims supports a labor market that is at, or very near, full employment. Durable Goods Orders Durable goods orders increased 2.0% in July after increasing an upwardly revised 4.1% (from 3.4%) in June. The Briefing.com Consensus expected durable goods orders to decline 0.6%. Excluding transportation, durable goods orders increased 0.6% in July after increasing an upwardly revised 1.0% (from 0.6%) in June. The consensus expected these orders to increase 0.4%. A big reason for the much better-than-expected gain in durable goods demand came from the automotive sector. Orders for motor vehicles and parts products rose 4.0% in July after increasing 0.8% in June. That move follows the huge increase in the production and assembly of motor vehicles that was reported in the July industrial production data. Aircraft orders, which were expected to push overall durable goods orders into negative territory, declined a relatively modest 7.8%. That drop was easily offset by the aforementioned increase in motor vehicle orders. Demand for finished durable goods was extremely strong. Orders of machinery (2.0%), communications equipment (1.8%), and electrical equipment (1.3%) all exceeded 1.0% growth. Demand for manufacturing inputs, however, wasn t so hot. Both primary (-1.8%) and fabricated metals (- 1.3%) orders declined in July. Business capital demand remained very robust. Orders of nondefense capital goods excluding aircraft increased 2.2% in July after increasing an upwardly revised 1.4% (from 0.7%) in June. That was the largest increase in orders of business capital goods since a 5.8% gain in June Shipments, which factor into GDP growth calculations, rose 0.6% in July after increasing 0.9% in June. Manufacturing production growth still lags orders demand trends, which is producing large numbers of unfilled backlogs.. New Home Sales New home sales increased 5.4% in July to 507,000 from a downwardly revised 481,000 (from 482,000) in June. The Briefing.com Consensus expected new home sales to increase to 511,000. After starting the year on a tear, new home sales have settled into a range of around 500,000 per month since March. That s way up from the 437,000 homes sold in 2014, but we are not seeing an acceleration in demand trends that a recovering market would have expected by now. Gains were reported in the Northeast (23.1%), West (6.7%), and South (5.8%). Sales declined 6.9% in the Midwest. Inventory levels inched up 1.9% to 218,000. That represents a 5.2 months supply at the current sales rate, down from a 5.3 months supply in June. Inventories are typically maintained at a 6 months supply during normal selling periods. The median existing home price increased 2.0% y/y to $285,900. While sales are still trending above 2013 and 2014 levels, we haven't seen the clear move higher that would indicate a normalizing market. subscribers own potential risk.6

7 Michigan Sentiment The University of Michigan Consumer Sentiment Index dropped to 85.7 in the preliminary September reading from 91.9 in August. The Briefing.com Consensus expected the index to fall to That was the lowest reading of the Consumer Sentiment Index since it reached 84.6 in September At that time, however, sentiment was trending upwards. The Current Conditions Index fell to in September from 105.1in August. The Expectations Index declined to 76.4 from The overall decline in the Consumer Sentiment Index can be traced to the sharp retraction in stock prices that began at the end of August. Other measures that typically impact confidence levels -- gasoline prices and employment conditions -- continued to improve over the past few weeks. Fortunately, consumption growth is not reliant upon changes in sentiment. As long as the labor market continues to strengthen and income growth trends higher, consumption growth should follow. Consumer sentiment has little influence on consumption. As long as payroll levels continue to expand, the resulting income growth should keep consumption gains steady regardless of the monthly ebbs and flows in sentiment. The Watch List subscribers own potential risk.7

8 Symbol Earnings RHT 9/21 NKE 9/24 COST 9/29 WBA 10/05 MON 10/07 EBAY 10/13 NFLX 10/13 AAPL 10/19 BA 10/20 SNDK 10/21 UA 10/21 CAT 10/22 P 10/23 FB 10/26 BIDU 10/27 V 10/27 F 10/27 GRMN 10/27 SBUX 10/28 XOM 10/29 CVX 10/29 VLO 11/02 FSLR 11/04 DIS 11/04 TM 11/06 HD 11/17 BBY 11/18 DE 11/25 SWHC 12/02 ADBE 12/17 The Bull Put Spread A credit spread, the bull put uses a credit on a short, out of the money option as the primary option, with a long put option one or two strikes lower as the hedging option. The short put is typically placed at or below a strong level of support, and as the name of the trade suggests, when the stock is in a bullish pattern. The ideal scenario is for both options to expire worthless which allows us to book our maximum profit. subscribers own potential risk.8

9 subscribers own potential risk.9

The Under Armour, Inc. (UA) Bull Call Calendar

The Under Armour, Inc. (UA) Bull Call Calendar uly 27, 2015 The Signal Under Armour, Inc. (UA) Bull Call Calendar The Safe Option Strategy The Safe Option Strategy Ø BTO Oct15 $95.00 Strike Calls - $5.60 Debit Ø STO Sep15 $100.00 Strike Calls $2.15