A large rise in U.S. Treasury yields is pulling global bond yields higher across the board and boosted the dollar, while stocks fell in response. The 10-year Treasury note is now at its highest level since mid-2011, up 7 bps to 3.23%, as recent comments from Federal officials signaled more rate hikes are on the horizon. Economic figures pointing to strength in the U.S. economy are also causing markets to reassess how far the Fed’s tightening cycle will go.*Source: Seeking Alpha
Let’s consider FMC Corporation (Ticker: FMC):
The VantagePoint platform recently indicated upside momentum.
Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on October 2nd. We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN on September 28th. This indicator measures strength and weakness for a 48-hour period, in this case, strength. The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength. I want to play the VP bullish indication.
If you are strictly a stock trader, simply buying FMC in the $91.50 area is a prudent move. You are anticipating a move to the upside. It is always a good idea to enter a sell-stop order to mitigate potential losses. Placing that sell-stop in the $89.00 area will achieve that goal.
For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.
Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation. You will first want to calculate your target strike. In order to do this, you will need three pieces of data: current price, expiration date and the implied volatility associated with that expiration date. For NVDA, that yields a targeted strike of ~$97.50. You may want to consider the FMC October 19th regular monthly expiration 95/97.5 call spread, buying it for $0.50. The most you can lose is the premium paid and the most you can gain is the width of the wider spread less any premium paid. Max risk = $0.50 and max reward = $2.00
This means that you are getting odds of 4.00:1.
Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.
You will recall the bullish position we took in GOOGL on 9/21/2018 from the bullish momentum indicated on the VantagePoint platform. We entered the October 19th 1230/1240/1245 call broken-wing butterfly for a debit of $1.25. Here is the chart on our exit on 10/1/2018:
Although GOOGL was still looking relatively strong, we noted that some of our momentum indicators were pointing to possible waning bullish momentum. We exited our signal at $2.35 for an ROI of 88.0%!