Two Biggies: 1267% and 800% — then Follow the Bouncing Ethylene Rubber Monomer (DOW, HRB, CELH, TPOR)

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Our underlying for today’s trade, Dow Inc. (NYSE:DOW) makes everything chemical, including, of course, an array of propylene aromatics, polyolefin elastomers, and your choice of ethylene monomer rubbers in a myriad of colors.

But before we divulge the money-making specifics of the trade, we’ve got THREE bets that require your attention – two to close outright, and one to move toward closure.

And we start with HRB.

Details on the trade can be found HERE, but the sticky part’s like this – we’re holding the October 21^st 41 synthetic short and a debit of a dime.

And…?

With HRB now trading at $38.71, the trade should be closed.

Buy back the CALL for $0.35 and sell the PUT for $2.50 (and cancel all STOPs), and you exit the trade with $2.05 NET on nothing laid out.

Adjusted for minimal commissions gives you a profit of 1267%!

Can You Say—FINANCIAL FREEDOM..?

Sure you do… COP-KILLER!

Next up is our CELH trade, that arrived in your inbox on August 17^th.  The dispatch was called Fizzy Drink Maker Delivers Bubbly Earnings, Stock Goes Flat, and it urged you to sell the CELH October 21^st 95/100 CALL spread for $2.10 and buy the CELH October 21^st 90/85 PUT spread for the same price.  Zero premium was the result.

And now…?

The CALL spread can be repurchased for $1.05 (1.85/0.80).

And the PUT spread can be disposed of for $2.40 (6.70/4.30).

Get it done, and you NET $1.35 on zilch spent.

Adjusted for minimal commissions gives you a win of 800%.

NEXT!

We’re buying back a single short CALL from our TPOR/DUSL initiative, whose details can be found HERE.

It’s the December 16^th 32 strike, and it’ll cost us $1.05, leaving us a credit on the trade of $4.22 and two open, long December 16^th CALLS at the 39 strike (one on each underlying).

And two full months to profit from them!

And now to DOW…

We start with the Fundamentals.

• P/E is a ripe 5.03,
• Dividend Yield is a plump 6.24%, and
• Price to Book is a bite-sized 1.72.
• In other words, we’re all BUY from a value perspective.

DOW announces earnings in a week (October 20^th).

She’s also a component of the DJIA.

But she struggles when energy prices are high (as they are now).

Have a look at the chart –

Technicals break down as follows –

1. First, RSI was oversold in June (circled, in red), a development that immediately curtailed selling momentum – even though price continued to drop.
2. Buyers have slowly taken the reins since then, evidenced in the positive divergence from both RSI and MACD indicators (green arrows).
3. Price action has formed a well-defined, two month trend channel (in red) that now appears poised for a breakout.
4. We look to the moving averages, all of which are unfurled and trending lower for roughly two weeks now (in black), as a source for a bullish turn. Our experience is that bounces regularly ensue when this occurs.
5. How high she goes is unknown, but the gap to 51 needs closing (in blue), so we’re setting our initial sights on that level.

And offering this –

A Jew and His Money recommends you consider selling the DOW January 20^th 47.50/45 PUT spread for a credit of $1.25 (5.65/4.40) and buying the DOW January 20^th 45/47.50 CALL spread for the same $1.25 (2.99/1.74).  Net zero premium is the result.

Rationale: maximum gain is $2.35 NET on nothing laid out.  That makes for a hefty 1567%.

Max loss on the affair is $2.50 (difference between the PUT strikes).

Back at you next Thursday after Simchat Torah!

G’mar tov!

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew