DUK: Utility Climbs to New Highs
Sep 10th, 2024
DUK: Utility Climbs to New Highs
On Septmber 9th, we looked at a Monthly Price Chart for CBOE Global Markets Inc., noting that CBOE’s 1-Month Price is trading above the 10-Month SMA signaling a ‘Buy’.
For yeterday Trade of the Day we will be looking at a Daily Price chart for Duke Energy Corp., stock symbol: DUK.
Before breaking down DUK’s daily price chart let’s first review which products and services are offered by the company.
Duke Energy Corporation is one of the largest energy holding companies in the United States. Its Electric Utilities and Infrastructure business unit serves the customers. The company’s Gas Utilities and Infrastructure business unit distributes natural gas to the customers in the Carolinas, Ohio, Kentucky and Tennessee.
Now, let’s begin to break down the Daily Price chart for DUK. Below is a Daily Price Chart with the price line displayed by an OHLC bar.
Buy DUK Stock
The Daily Price chart above shows that DUK stock began reaching a series of higher highs and higher lows since early-May.
This pattern of bullish trading suggests the stock will march on to a further advance.
You see, after a stock makes a series of two or more higher highs and higher lows, the stock typically continues its price up trend and should be purchased.
Our initial price target for DUK stock is 121.25 per share.
145.0% Profit Potential for DUK Option
Now, since DUK stock is currently making a series of higher highs and higher lows this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a DUK call option purchase.
The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat DUK price to a 12.5% increase.
The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following DUK option example, we used the 1% Rule to select the DUK option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.
Trade with Higher Accuracy
When you use the 1% Rule to select a DUK in-the-money option strike price, DUK stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if DUK stock is flat at 116.93 at option expiration, it will only result in an 8.8% loss for the DUK option compared to a 100% loss for an at-the-money or out-of-the-money call option.
Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.
The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.
The prices and returns represented below were calculated based on the current stock and option pricing for DUK on 9/10/2024 before commissions.
When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.
For this specific call option, the calculator analysis below reveals if DUK stock increases 5.0% at option expiration to 122.78 (circled), the call option would make 68.1% before commission.
If DUK stock increases 10.0% at option expiration to 128.62 (circled), the call option would make 145.0% before commission and outperform the stock return more than 14 to 1*.
The leverage provided by call options allows you to maximize potential returns on bullish stocks.
The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.
Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.