The latest Young Aristocrats research piece is out and a trade idea that immediately caught my eye is one that is currently breaking through the proverbial glass ceiling.
This manufacturer of glass and fiberclass products is finally breaking out of a 3-year base.
Check this chart of Owens Corning $OC:
It has fully recovered the scary 2020 dip and looks ready to launch a new leg higher.
Here’s Steve Strazza:
…the thing we like most about $OC is definitely the new all-time highs. Owens just ripped right through its 2018 record highs, resolving higher from a 3-year base and confirming the move with a bullish momentum reading.
We want to own OC as long as we’re above those former highs of about 97 with a target of 139 over the next 3-6 months.
We’ve also got a potential catalyst at play here with earnings coming up on April 28th which could give us some extra oomph. And with implied volatility in the $OC options pretty cheap here, this sets up a great opportunity to play this stock with simple long calls
Here’s the Play:
I’m buying $OC November 115 calls for around $3.50. This debit is the most I can possibly lose in this trade. However, an $OC close below $90 per share will be my signal to cut the trade to prevent any further losses. I don’t want to lose 100% of my premium if I can avoid it. But I’m prepared to do so if the trade blows up on me.
These calls currently sport a 28 delta which will give us some nice leverage if the stock takes off higher.
On the upside, as is always my Best Practice when buying long calls, I’ll look to sell half of my position if we see the value of these calls double in price. This removes all my original risk capital from the trade and makes it easier for me to hold for an extended run into November expiration.
If we’re still in the trade when the calendar turns to November 1, then we’ll start paying close attention. If our calls are out-of-the-money at that point, then I’ll close the trade for whatever premium is left (if anything). If they are (hopefully) in-the-money, then I’ll keep holding those calls and trail a stop loss below nearby support TBD at the time.
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!