[Options] It's Time...

Here's a longer-term chart Steve Strazza shared of $ABT in last night's All Star Charts Monthly Conference Call:

Anyone who's been following me a while knows that I love buying long calls when volatility is low and a stock is at or threatening to make all-time highs. Blue skies ahead set up the potential for massive winners. Do they always work out? Of course not! But we gotta step up to the plate and take our swings when these setups present themselves.

So, I'm keeping it simple and buying long calls.

Here's the Play:

I'm buying $ABT November 110 calls for approximately $2.80 per contract. This premium is the most I can lose if the stock tanks on me.

If the stock reverses on me, my stop out level is $95. Any close below $95 and I'll take my ball and go home. I'm too early.

On the other hand, if the move we're looking for materializes, I'll do what I always do with long calls: I'll sell half of my position at a double which removes all of my original risk from the trade, and then I'll attempt to hold the rest all the way until November. Once into the month of November, I'll continue holding the calls if they are in-the-money ($ABT is above our $110 strike price) until any nearby support is broken. Otherwise, I'll close the position to salvage whatever (if any) premium is left. Out-of-the-money calls with less than 21 days until expiration begin to rapidly decay away any premium left in the options. No bueno. I'll just close and get out.

If you have any questions on this trade, hit me on twitter or stocktwits: @chicagosean

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