Optioneering Newsletter

April 14, 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
INTU, or Intuit, Inc. Intuit provides financial management and compliance
products and services for small businesses, consumers, self-employed
and accounting professionals. Its flagship products and services include
QuickBooks and TurboTax, which make it easier to manage small
businesses and tax preparation and filing. QuickBooks Self-Employed
provides freelancers and independent contractors with an easy and
affordable way to manage their finances and save money at tax time,
while Mint delivers financial tools and insights to help people make smart
choices about their money. Intuit's ProConnect brand portfolio includes
ProConnect Tax Online, ProSeries and Lacerte, the company's leading
tax preparation offerings for professional accountants.

INTU Monthly

The monthly chart shows that INTU has been in a strong bull trend since
late 2016. INTU hit a new record high this month. New record highs are
bullish.

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 INTU Daily

As we said above, INTU hit a new all-time high earlier this month. The pullback
from the record high gives us a buying opportunity.

We recommend buying INTU stock at current price levels.

The next profit opportunity we will review this week is an Option Purchase in TJX, or
TJX Companies, Inc. TJX is the leading off-price retailer of apparel and home
fashions in the U.S. and worldwide. The Company operates T.J. Maxx, Marshalls,
and HomeGoods stores in the United States, Winners, HomeSense, Marshalls, and
STYLESENSE stores in Canada, and T.K. Maxx and HomeSense stores in Europe.
The TJX Companies, Inc. is headquartered in Framingham, Massachusetts.

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 TJX Monthly Chart

The monthly chart shows that TJX has been back in a strong bull
trend since the December low. The next upside targets are 60 and 65.

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 TJX Daily Chart

The daily chart shows that TJX has been going straight up since the December
low. There are no signs of a top.

We are now going to review a call option purchase for TJX.

We will first look at selecting a call option strike price for purchasing a TJX call
option. TJX is currently trading at 53.97, so let’s take a look at the May 17th 45-
strike call. May 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 .23 points (boxed in red). The time value of .23 is
less than 1% of the 53.97 stock price so this strike price qualifies under the 1%
Rule.

Buy to Open the TJX May 17 2019 45–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 TJX stock increases 1% at option expiration (circled) a 3.4%
profit will be realized confirming the 1% Rule of profiting with only a 1% increase in
the stock price.

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 Buy to Open the TJX May 17th 45–Strike Call

There is no limit on the profit potential of call option purchases if the

underlying stock continues to increase in price. If TJX increases 10% between
now and option expiration, the Call Option Purchase Calculator shows that the
45-Strike Call will realize a 56.2% or $517 profit (boxed in red).

On the other hand, if TJX is flat at 53.97 at option expiration, the 45-Strike
Call will only lose -2.5% or -$23 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 TJX May 17th 45-Strike Call at current prices.

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The next profit opportunity we will consider this week is in TWLO, or Twilio, Inc.
Twilio provides Cloud Communications Platforms. The Company enables developers
to build, scale and operate real-time communications within software applications. Its
Programmable Communications Cloud software enables developers to embed voice,
messaging, video and authentication capabilities. The Super Network is the software
layer which allows its customers' software to communicate with connected devices
globally.

TWLO Monthly

The monthly chart shows that TWLO has been very bullish for over a year.
The next upside target is 150.

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 TWLO Daily Chart

Like INTU, TWLO hit a new record high last month. Also like INTU, the
pullback from the new record high gives us a buying opportunity.

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

Traders who want to use a more leveraged approach can but TWLO calls.

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 Buy to Open TWLO May 17 110-Strike Call
Sell to Open TWLO May 17 120-Strike Call

We can see from this call option spread analysis that if the TWLO stock price
declines by -2.5%, stays where it is, or increases in price when the options
expire, we will make a 49.3% or $330 profit. If TWLO is down -5% when the
options expire, the profit will be 40.8% or $273.If TWLO is down -7.5% when
the options expire, we will lose -6.1% or -$41.

The last profit opportunity we will consider this week is in TNA. TNA is the Smallcap Bull
3X Direxion ETF. TNA seeks daily investment results, before fees and expenses, of
300% or 300% of the inverse (or opposite) of the performance of the Russell 2000
Index.

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 TNA Monthly Chart

We’re breaking the rules a little bit here. TNA is not quite above the monthly
moving average line. However, it has been bullish since the December low
and the overall market is very strong, so we expect the Russell Small Cap
Index to continue to advance and we expect TNA be above the monthly
moving average line very soon. Possibly by the end of this month. Also, the
rally since the December low gives TNA a bullish higher low bottom setup on
the monthly chart. Higher low bottoms are bullish.

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 TNA Daily Chart

The daily chart for TNA has a higher low bottom at last month’s low. A
break through 70 could result in a rally to 80 or higher.

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

Traders who want a more leveraged approach can buy TNA calls.

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 Buy to Open TNA May 31 55-Strike Call
Sell to Open TNA May 31 65-Strike Call

We can see from this call option spread analysis that if the TNA ETF price
stays where it is or increases in price when the options expire, the spread will
make a 37% or $270 profit. If TNA is down -2.5%, the profit will be 34.4% or
$251. If TNA is down -5% at option expiration, we’ll make 11.6% or $85. If
TNA is down -7.5% at option expiration, we’ll lose -11.2%, or -$82.

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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