December 2, 2020 - MDT Alert (CVS)

I would like to make a suggestion on a stock that is breaking out.

The stock is CVS Health Corp. (CVS)

CVS is trading around $69.75 as I write this.

I am going to suggest a debit spread and trade the January 8th expiration day.

This gives CVS a few weeks to make a move higher.

Here is how you open the position:

Buy to Open January 8th - $70.00 Call for $2.35

Sell to Open January 8th - $75.00 Call for $.85

The net debit will be $1.50 per spread.

Based on the tracking portfolio, I suggest you limit the trade to a 6 lot or .9% of the portfolio.

The maximum gain on a six lot would be about $2,100 or 233%.

CVS has to move above $75 to earn maximum profit.

I am limiting the trade to under 1% of the nominal portfolio because it is just out of the money.

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.