Dec 5, 2023 | Chuck’s Trade of the Day
On December 4th, we looked at a Daily Price Chart of F5 Networks, Inc., noting that FFIV’s OBV line is sloping up, validating the recent bullish trend.
For today’s Trade of the Day we will be looking at a Daily Price chart for Republic Services, Inc. stock symbol: RSG.
Before breaking down RSG’s daily price chart let’s first review which products and services are offered by the company.
Republic Services, Inc., together with its subsidiaries, offers environmental services in the United States. It is involved in the collection and processing of recyclable, solid waste, and industrial waste materials; transportation and disposal of non-hazardous and hazardous waste streams; and other environmental solutions. Its residential collection services include curbside collection of material for transport to transfer stations, landfills, recycling centers, and organics processing facilities; supply of recycling and waste containers; and renting of compactors.
Now, let’s begin to break down the Daily Price chart for RSG. Below is a Daily Price Chart with the price line displayed by an OHLC bar.
Buy RSG Stock
The Daily Price chart above shows that RSG stock has been hitting new 52-Week Highs regularly since early November.
Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend.
The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.
You see, after a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased.
Our initial price target for RSG stock is 170.00 per share.
89.4% Profit Potential for RSG Option
Now, since RSG stock is currently making a series of new 52-Week Highs this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for an RSG 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 RSG 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 RSG option example, we used the 1% Rule to select the RSG 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 an RSG in-the-money option strike price, RSG 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 RSG stock is flat at 162.56 at option expiration, it will only result in a 1.6% loss for the RSG 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 RSG on 12/4/2023 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 RSG stock increases 5.0% at option expiration to 170.69 (circled), the call option would make 43.9% before commission.
If RSG stock increases 10.0% at option expiration to 178.82 (circled), the call option would make 89.4% before commission and outperform the stock return nearly 9 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.
*Trading incurs risk and some people lose money trading.