[Options] Looking To Trace the Path to the Big Leagues

Sean McLaughlin
June 24, 2021

There's nothing more gratifying than watching our youngsters graduate to the next level, cheering on athletes who advance through the ranks, or enjoying the ride of our investments moving from "small cap" to "large cap" during our hold.

The 2 to 200 Club report that the All Star Charts team produces attempts to give us the heads up on the next companies that are likely to make the step up to the next level. You can read our latest report here.

One of the names that caught my attention is one involved in data analytics utilizing Artificial Intelligence to drive performance.

Here's Steve Strazza on Dynatrace $DT:

Next up is the $17B software company Dynatrace Inc $DT:

Price is resolving to new all-time highs on an absolute basis after consolidating beneath our risk level for the better part of the year. The stock is also working on a 12-month base breakout relative to the broader market as it trades just off fresh relative highs.

We want to be long above 58 with a target of 84 over the next 2-4 months.

The stock did indeed break out above 58 this week. And coupled with low implied volatility priced into these options, this sets up my favorite play: Buying calls on stocks making new all-time highs!

Here's the Play:

I'm buying $DT November 75 calls for $2.00. This debit is the most I can lose in the trade. If $DT can't hold the $56 level, then that will be my signal to exit. Otherwise, I'll be looking to hold this position for a ride towards the ASC price target of $84 per share.

If we make that run, I'll look to sell half of my position to take all of my original risk off the table. This will give me the level of comfort I desire to hold on to potentially more robust gains. This is a best practice I regularly adhere to in order to manage my own failings as a human. This tempers my enthusiasm for exiting trades completely when fear creeps in that I might lose all of my open gains. It's a weakness of mine and I suspect I'm not along with these imperfections. This little trick of closing half keeps me in the big winners.

If we're still in this trade on November 1st, we'll reassess the situation then and make a determination whether or not to continue holding -- depending on whether or not the calls are in-the-money then.

If you have any questions on this trade, subscribers can send them here.

~ @chicagosean

P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free!

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