Verisk Analytics Rocketing Higher!

June 25th, 2024

Verisk Analytics Rocketing Higher!

Dear Reader,

On June 24th, we looked at a Daily Price Chart of Equity Residential Property Trust,  noting that EQR’s OBV line is sloping up, validating the price uptrend.

For yesterday Trade of the Day e-letter we will be looking at a monthly chart for Verisk Analytics Inc. stock symbol: VRSK.

Before breaking down VRSK’s monthly chart let’s first review what products and services the company offers.

Verisk Analytics is a data analytics providers serving customers in insurance, energy and specialized markets and financial services. Using advanced technologies to collect and analyze data, Verisk draws on unique data assets and deep domain expertise to provide innovations that are integrated into customer workflows.  

Now, let’s begin to break down the monthly chart for VRSK stock.

Below is a 10-Month Simple Moving Average chart for Verisk Analytics Inc.

Buy VRSK Stock

As the chart shows, in May, the VRSK 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for VRSK stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend.

Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play! 

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for VRSK is 279.75 per share.

113.3% Profit Potential for VRSK Option

Now, since VRSK’s 1-Month Price is trading above the 10-Month SMA 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 VRSK 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 VRSK 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 VRSK option example, we used the 1% Rule to select the VRSK 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 VRSK in-the-money option strike price, VRSK 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 VRSK stock is flat at 271.77 at option expiration, it will only result in a 5.1% loss for the VRSK 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 VRSK on 6/24/2024 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 VRSK stock increases 5.0% at option expiration to 285.36 (circled), the call option would make 54.1% before commission. 

If VRSK stock increases 10.0% at option expiration to 298.95 (circled), the call option would make 113.3% before commission and outperform the stock return more than 11 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.

Chuck Hughes

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