Trade Alert - (UNP) May 21, 2021 - EXPIRATION AT MAX PROFIT

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.

 

Trade Alert - (UNP) – EXPIRATION AT MAX PROFIT

EXPIRATION of the Union Pacific (UNP) May 2021 $200-$210 in-the-money vertical Bull Call debit spread at $10.00

Closing Trade - NOT FOR NEW SUBSCRIBERS, YOUR TURN WILL COME

5-21-2021

Expiration date: May 21, 2021

Portfolio weighting: 10%

Number of Contracts = 12 contracts

Since we added this position, shares of the Union Pacific (UNP) have risen by a mere $0.20 from $222.71 to $221.93. That is miles away from the nearest $210.00 strike price for this position.

Yet, we get to take home the maximum profit in this position, such is the magic of vertical bull call debit spreads.

Nothing like having an industry-wide takeover battle to support your long position, as we are seeing between Canadian Pacific (CP) and Kansas City Southern (KSU). We received an additional boost from a surprise 10% increase in (UNP)’s dividend.

The harder I work, the luckier I get.
 
As a result, we are now in a very safe cushion to take us into the option expiration at the end of today. I think it’s safe to call it a win. Therefore, you will get to take home $1,560 or 14.94% in 19 trading days.

Well done and on to the next trade!

You don’t have to do anything with this expiration.

Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.

The entire profit will be credited to your account on Monday morning, May 24 and the margin freed up.

Some firms charge you a modest $10 or $15 fee for performing this service.

When the US economy recovers, you suddenly have to move a lot more stuff. There is no better stuff moving industry than railroads, which can do it cheaper than anyone else.

Work out the price per pound for moving bulk freight and it works out to a car getting five miles per gallon.

You can subdivide railroads into north/south ones and east/west ones. A Biden administration will bring a revival of east west trade, thanks to greater exports of commodities, coal, and agricultural goods to China. North/south rail lines do better thanks to more trade with Mexico.

For more about this amazing railroad please see my special report below.

This was a bet that Union Pacific (UNP) would not fall below $210 by the May 21 option expiration day in 19 trading days.

Here are the specific actions you need to close out this position:

EXPIRATION of 12 May 2021 (UNP) $200 calls at……………$21.93

EXPIRATION of short 12 May 2021 (UNP) $210 calls at…....$11.93

Net Proceeds:……………….......……..…….………..………….….....$10.00

Profit: $10.00 - $8.70 = $1.30

(12 X 100 X $1.30) = $1,560 or 14.94% in 19 trading days.

 

The Case for Railroads

When copper and Freeport McMoRan (FCX) run up, there is one thing I always do automatically, reflexively, and without thinking about it.

I buy railroads.

This is because a revival of Chinese infrastructure building is driving the recent meteoric rise in the red metals.

The US is one of the largest producers of copper, fourth in the world after Chile, Peru, China, with 1,520 metric tonnes in annual output.

So how does the metal get to the Middle Kingdom?

It rides the Union Pacific Railroad (UNP).

(UNP) has predominantly East/West routes and will benefit the most from increasing trade with China that will come with a new Biden administration.

China will finance half of any US government debt going forward to finance the president’s substantial spending plans, so there isn’t going to be a trade war here.

If you want to reduce your risk, buy the iShares Transportation Average ETF (IYT). The two largest holdings here are (UNP) and Kansas City Southern (KSU).

Baskets of shares always have lower volatility than single stocks, but lower returns as well.

Buy the railroads. At least, if you are early, you still have a functioning, cash flow-positive business.

Railroads all look like ripe “buy on dips” low-hanging fruit to me.