[Options] I Buy New All Time Highs

Sean McLaughlin
May 7, 2024

No setup gets me more excited than buying a fresh new all-time high.

There are no bagholders looking to unload their losing position to breakeven. Every investor or trader holding a long position is making money. And every trader holding a short position is losing money and the only way they correct that sad state of affairs is to buy stock to stop their losses.

In other words, blue skies above.

This doesn't guarantee success on a long trade here, of course. But these are the types of trades that commonly lead to my biggest gains.

Here's a weekly chart of semiconductor name Analog Devices $ADI:

As you can see, this week -- today in fact -- $ADI has printed an all-time high.

I'm already positioned in a delta-neutral credit spread in Analog's cousin $NVDA. As such, I additionally like this trade as a hedge against $NVDA stopping me out of my neutral trade.

And options premiums priced suspiciously cheap ahead of an earnings report scheduled to be released before the market opens on May 22nd offers us a good opportunity for a nice reward-to-risk setup.

Here's the Play:

I like buying $ADI December 240 calls for $7.00 or cheaper. This premium I pay is the most I can lose in this trade in a worst-case scenario.

I'll look to minimize losses if these calls lose 50% of their value, or if $ADI sees a closing price below $200 per share. Either situation signals that I'm early or wrong and I'll want to protect what's left of my capital in this trade.

On the upside, I'll look to sell half of my calls if I can sell them for double what I paid today. This will pay me back all of my original risk capital, while leaving me with a half position with potential for unlimited upside from there. We call that a #FreeRide around here!

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

If you missed my most recent ASO video Jam Session, you can catch a replay on Stock Market TV.

~ @OptionsSean

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! Or give us a call to learn more: 323-421-7991.

Filed Under