Major Insurer Making Series of Higher Highs

March 24^th, 2022

Major Insurer Making Series of Higher Highs

Dear Reader,

Yesterday, we looked at a Monthly Price Chart of Palo Alto Networks Inc. noting the stock’s 1-Month Price is trading above the 10-Month SMA signaling a ‘Buy’.

For today’s Trade of the Day we will be looking at a Daily Price chart for The Travelers Companies, Inc. stock symbol: TRV.

Before breaking down TRV’s daily price chart let’s first review which products and services are offered by the company.

The Travelers Companies, Inc., through its subsidiaries, provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally.

Now, let’s begin to break down the Daily Price chart for TRV. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

Buy TRV Stock

The Daily Price chart above shows that TRV stock began reaching a series of higher highs and higher lows since the beginning of March.

This pattern of bullish trading suggests the stock will march on to a further advance.

You see, after a stock makes a series of two or more higher highs and higher lows, the stock typically continues its price up trend and should be purchased.

Our initial price target for TRV stock is 190.50 per share.

94.9% Profit Potential for TRV Option

Now, since TRV stock is making a series of higher highs and higher lows and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a TRV call option purchase.

The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat TRV price to a 12.5% increase.

The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following TRV option example, we used the 1% Rule to select the TRV option strike price but out of fairness to our paid option service subscribers we don’t list the strike price used in the profit/loss calculation.

Trade with Higher Accuracy

When you use the 1% Rule to select a TRV in-the-money option strike price, TRV stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if TRV stock is flat at 181.62 at option expiration, it will only result in a 6.9% loss for the TRV option compared to a 100% loss for an at-the-money or out-of-the-money call option.

Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.

The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks.

The prices and returns represented below were calculated based on the current stock and option pricing for TRV on 3/23/2022 before commissions.

When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price.

For this specific call option, the calculator analysis below reveals if TRV stock increases 5.0% at option expiration to 190.70 (circled), the call option would make 44.0% before commission.

If TRV stock increases 10.0% at option expiration to 199.78 (circled), the call option would make 94.9% before commission and outperform the stock return more than 9 to 1.

The leverage provided by call options allows you to maximize potential returns on bullish stocks.

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.

Chuck's Trades Are Within Your Reach

Do you want to start receiving hand-picked trades from 10-Time Trading Champion, Chuck Hughes?

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!

You can also CLICK HERE to schedule a call!

Wishing You the Best in Investing Success,

Chuck Huges Signature

Chuck Hughes

Editor, Trade of the Day

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Major Insurer Making Series of Higher Highs

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