2019 Apr 28

Optioneering Newsletter
April 28, 2019
In this week’s Optioneering newsletter we are going to start by

reviewing the recent price performance of the S&P 500 Index and
then look at several new profit opportunities.
$SPX Monthly Chart
The S&P is above the moving average line, so the trend is up. From
looking at the $SPX monthly chart we can see that since the correction at
the end of 2018 the S&P 500 has been on a strong bull trend. Because of
this we will review four bullish trades today.
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The first profit opportunity we will review this week is a stock purchase in
DHR, or Danaher Corporation. Danaher Corporation is a globally
diversified conglomerate with its headquarters in Washington, DC.
Danaher is ranked 162nd on the 2018 Fortune 500 list. Its products are
concentrated in the fields of environmental and applied solutions, dental-
related businesses, life sciences and diagnostics.
DHR Monthly
The monthly chart shows that DHR has been in an overall bull trend since
the chart started in 2016. DDHR hit a new record high this month. New
record highs are bullish.
2
DHR Daily
As we said above, DHR hit a new all-time high earlier this month. The
pullback from the record high gives us a buying opportunity.
We recommend buying DHR stock at current price levels.
3
The next profit opportunity we will review this week is an Option Purchase in PG, or
Proctor & Gamble Company. P&G is engaged in the manufacture and sale of a range
of branded consumer packaged goods. The company operates in five segments:
Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and
Family Care.
P&G Monthly Chart
The monthly chart shows that PG has been in a very strong bull trend since
last May. There are no signs of a top.
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P&G Daily Chart
PG gapped down after issuing its earnings report this week. However, it
made a quick comeback. Friday’s trading points to a further advance.
We are now going to review a call option purchase for P&G.

We will first look at selecting a call option strike price for purchasing a PG call
option. PG is currently trading at 105.86, so let’s take a look at the May 31st
100 strike call. May 31st options have 33 days to expiration. We will analyze
this option using the Optioneering Call Option Purchase calculator.
The Call Option Purchase calculator will calculate the profit potential for a call
option purchase trade based on the price change in the underlying stock/ETF at
option expiration in this example from a 12.5% increase in stock price to a flat stock
price.
We developed what we call the 1% Rule to help us select an option strike price.
The 1% rule says to limit the time value portion of the option to less than 1% of the
stock price.
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If you limit the time value portion of an option to 1%, the stock price only has to
move up 1% for the option to breakeven and start profiting.
The calculator will also calculate the time value portion of an option. With this option
purchase, the time value is .44 points (boxed in red). The time value of .44 is less than
1% of the 105.86 stock price so this strike price qualifies under the 1% Rule.
Buy to Open the PG May 31 100–Strike Call
The second row from bottom of the calculator lists the dollar profit potential. The
bottom row lists the percent return profit potential.
We can see that if P&G stock increases 1% (boxed in green) at option expiration a
9.8% profit will be realized confirming the 1% Rule of profiting with only a 1%
increase in the stock price.
6
Buy to Open the PG May 31 100–Strike Call
There is no limit on the profit potential of call option purchases if the underlying
stock continues to increase in price. If PG increases 10% between now and
option expiration, the Call Option Purchase Calculator shows that the 100-
Strike Call will realize a 161% or $1015 profit (boxed in green).
On the other hand, if PG is flat at 105.86 at option expiration, the 100-Strike Call
will only lose -7% or -$44 compared to a 100% loss if we bought an at the money
or out of the money option and the stock price was flat at option expiration.
Remember, if you purchase an at-the-money or out-of-the-money strike call

option and the underlying stock/ETF is flat or down at option expiration, it will
result a 100% loss for your option trade!
Using the 1% Rule to select an option strike price will increase your percentage of
winning trades compared to trading at-the-money or out-of-the- money strike calls
and this higher accuracy can make you a more successful trader.
We recommend buying the PG May 31st 100-Strike Call at current prices.
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The next profit opportunity we will consider this week is in MDB. MDB, or MongoDB,
Inc. MongoDB is the leading modern, general purpose database platform, designed
to unleash the power of software and data for developers and the applications they
build.
MDB Monthly
MDB started trading in late-2017. The monthly chart shows that MDB has
been in a strong bull trend since May 2018.
8
MDB Daily Chart
The daily chart shows that MDB was especially bullish last month. The
pause/pullback after such a big move up is very normal. A further
advance is expected.
We are going to review a call option debit spread for MDB.
Traders who want to use a more leveraged approach can but MDB calls.
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Buy to Open MDB June 21 115-Strike Call
Sell to Open MDB June 21 130-Strike Call
We can see from this call option spread analysis that if the MDB stock price
declines by -5%, stays where it is, or increases in price when the options
expire, we will make a 52.3% or $515 profit. If MDB is down -7.5% when the
options expire, the spread will make a 37.6% or $371 profit.
10
The last profit opportunity we will review this week is in NFLX, or Netflix Inc. Netflix is the
world’s leading streaming television network. As of January 2019, Netflix had over 139
million paying subscribers worldwide, including 58.49 million in the United States. Netflix
is available almost worldwide except in mainland China, Syria, North Korea, Iran, and
Crimea.
NFLX Monthly Chart
The monthly chart shows that NFLX was very bullish in 2017 and 2018. Late
last year NFLX had a deep pullback. Trading since the December low
suggests that the pullback is over and the uptrend is resuming. The next
upside target is above last year’s high.
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NFLX Daily Chart
The daily chart shows that NFLX has been very bullish since the
December low. A further advance is expected.
We are going to review a Call Debit Spread trade for NFLX.
Traders who want a more leveraged approach can buy NFLX
calls.
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Buy to Open NFLX June 21 335-StrikeCall
Sell to Open NFLX June 21 350-Strike Call
We can see from this call option spread analysis that if the NFLX stock price
declines by -5%, stays where it is, or increases in price when the options
expire, the spread will make a 29.3% or $340 profit. If NFLX is down -7.5%,
there will be a 1.2% or $14 profit.
Regarding Earnings Season: Most major stocks issue earnings reports during
earnings season. There are four earnings seasons a year. The seasons begin in
January, April, July, and October and they each last about two months. The
reports can make an impact on the stock price. We don’t know if the impact is
going to be positive or negative (or nothing at all). It’s up to you to decide if you
want to be in a trade when the earnings report is announced. Here’s a link that
can help you keep track of the report dates:
https://www.earningswhispers.com/calendar
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Note: Profit performance displayed in this newsletter does not include commission costs.
This newsletter includes some trading ideas following Chuck Hughes’ trading strategies
along with educational information. For a complete listing of Chuck’s exact trades,
including specific entries and exits, email alerts and real time Portfolio Tracking, please
call Brad at 1- 866-661-5664 or 310-647-5664 for special pricing for subscribers of this
newsletter. For a limited time, we are offering a $3,000 Scholarship to join Chuck’s
Inner Circle Trading Service to newsletter subscribers. Use the code NEWSLETTER to
obtain this special pricing.
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Optioneering Newsletter

April 28, 2019

In this week’s Optioneering newsletter we are going to start by

$SPX Monthly Chart

We recommend buying DHR stock at current price levels.

We are now going to review a call option purchase for P&G.

Buy to Open the PG May 31 100–Strike Call

Remember, if you purchase an at-the-money or out-of-the-money strike call

We recommend buying the PG May 31st 100-Strike Call at current prices.

We are going to review a call option debit spread for MDB.

NFLX Monthly Chart

We are going to review a Call Debit Spread trade for NFLX.

Traders who want a more leveraged approach can buy NFLX

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