Weekend Trader Series
October 23, 2022
Open Positions Update
- The Merck (MRK) November 18, 2022, 75-strike call reaches its time-stop this Monday, October 24. Close the position at a limit price within range of the current market price when you place the order.
- Close the Airbnb (ABNB) December 16, 2022, 115-strike put on Monday, October 24. Close the position at a limit price within the range of the current market price when you place the order.
The following is this week's recommendation:
Travelers Companies (TRV)Place a limit order to buy the Travelers Companies (TRV) December 16, 2022 160-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, October 21, this option was offered at $19.50. TRV closed at $176.23 on Friday, October 21.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, November 21, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Blue-chip insurance name Travelers Companies (TRV) is fresh off a surprise earnings beat, after which the stock broke above its April and August highs as well as its round +10% year-to-date level – which marked a peak in early July.
Despite the positive earnings surprise and technical breakout, analysts are still hesitant on TRV. Of the 23 in coverage, 19 carry a “hold” or worse rating, with only four a “buy” or better.
Meanwhile, short interest has increased 50% since late April. These shorts are likely underwater, as TRV is above most of its daily closes since late April, which could lead to a bout of short covering into the year’s end.
There’s still plenty of space for the stock to rally to its March closing high at $188. Our recommended December 160 call has a leverage ratio of 6.8 and will double in value on a 13.9% pop in the underlying shares.
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