Weekend Trader Alert

Weekend Trader Alert

February 26, 2023

Open Positions Update

  • Please extend the scheduled time-stop date on the Goldman Sachs (GS) April 21, 2023, 350-strike call to Monday, March 13.

The following is this week's recommendation:

Charles Schwab (SCHW)

Place a limit order to buy the Charles Schwab (SCHW) May 19, 2023 77.50-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, February 24, this option was offered at $6.80. SCHW closed at $80.60 on Friday, February 24.

Do not attempt to enter this position after Monday's close.

Please use the following guidelines to manage the position:
  • Exit the position if the option is at a 100% gain from your entry price.
  • If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, March 27, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
The shares of Charles Schwab (SCHW) are forming a bullish engulfing candle that reversed its recent outside day. Plus, the security is breaking out in a bull flag pattern and found support at its 20-day moving average, and tested a floor at the 200-day moving average. The latter has also previously served as a major pivot point for the shares, making now an opportune time to bet on a move higher for SCHW.

Peak put open interest (OI) at the 80-strike is providing additional support, while large call OI at the April 90-strike could act as a magnet. It’s worth noting short-term options traders have been much more bearish than usual, per SCHW’s Schaeffer's put/call open interest ratio (SOIR), which sits higher than 86% of readings from the past year. In the past, SCHW has staged large moves that skew bullish whenever its SOIR was this high.

Furthermore, Charles Schwab stock is seeing attractively priced premiums right now, per its Schaeffer's Volatility Scorecard Index (SVI) that sits in the low 7th percentile of its annual range. Our recommended May 77.50-strike call has a leverage ratio of 7.9, and will double in value on a 12.9% rise in the underlying shares.

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