November 8^th, 2021

Built-In 61.3% Profit Potential for ASIX Trade

Dear Reader,

On Friday, we looked at a Daily Price Chart of Advanced Micro Devices, Inc., noting that the stock is currently making a series of 52-Week Highs.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for AdvanSix, Inc. stock symbol: ASIX.

Before breaking down ASIX’s monthly chart let’s first review what products and services the company offers.

AdvanSix Inc. manufactures and sells polymer resins in the United States and internationally. It offers Nylon 6, a polymer resin, which is a synthetic material used to produce fibers, filaments, engineered plastics and films.

Now, let’s begin to break down the monthly chart for ASIX stock.

Below is a 10-Month Simple Moving Average chart for AdvanSix, Inc.

Buy ASIX Stock

As the chart shows, in October 2020, the ASIX 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for ASIX stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend.

Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play!

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for ASIX is 52.75 per share.

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Profit if ASIX is Up, Down or Flat

Now, since ASIX’s Monthly Price is currently trading above the 10-Month SMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a ASIX call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 7.5% increase to a 7.5% decrease in ASIX stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for ASIX on 11/5/2021 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $310 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if ASIX stock is flat or up at all at expiration the spread will realize a 61.3% return (circled).

And if ASIX stock decreases 7.5% at option expiration, the option spread would make a 43.4% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 61.3% profit potential when the trade was initiated.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader.

The Hughes Optioneering Team is here to help you identify winning trades just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck's Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

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As a Trade of the Day subscriber, Chuck is offering you a special discount on his Weekly Option Alert Trading Service.

Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join and use the code "Optioneering VIP" to receive special pricing!

Wishing You the Best in Investing Success,

Chuck Huges Signature

Chuck Hughes

Editor, Trade of the Day

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Built-In 61.3% Profit Potential for ASIX Trade

Chuck Hughes: “250 Apprentices Wanted!”

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