Global Payments (GPN) Poised to Break $100 Mark

This week we are discussing a new addition to the Investor’s Business Daily (IBD) Top 50 List.  We use this list in one of our portfolios to identify stocks that have displayed strong upward momentum and place spreads to profit from the underlying trend.  Actually, the stock price can even fall a little bit for the maximum gain to be realized.

Terry

Global Payments (GPN) Poised to Break $100 Mark

Several analysts have recently refreshed their bullish targets for GPN.  Here are two of them – Wells Fargo Upgrades Global Payments (GPN) to Outperform and Global Payments price target raised to $105 from $98 at Barclays.

GPN boasts a strong uptrend and has recently broken above major resistance at $93.31 after correcting lower for five weeks.  The stock has regained its 20-day moving average following a turn higher in the second week of July and broke to all-time highs on Friday.

GPN Chart August 2017

*source Tradingview.com

If you agree there’s further upside ahead for Global Payments, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next six weeks.

Buy To Open GPN 15SEP17 90 Puts (GPN170915P90)
Sell To Open GPN 15SEP17 95 Puts (GPN170915P95) for a credit of $1.00 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when GPN was trading near $98.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $98 and your broker would charge a $500 maintenance fee, making your investment $402 ($500 – $98).  If GPN closes at any price above $95 on September 15, 2017, both options would expire worthless, and your return on the spread would be 24% (211% annualized).

If you think there’s further upside ahead for Global Payments, consider this trade which is a bet that the stock will continue to advance.

Buy To Open GPN 15SEP17 95 Puts (GPN170915P95)
Sell To Open GPN 15SEP17 100 Puts (GPN170915P100) for a credit of $2.33 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when GPN was trading near $98 at the close yesterday.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use tastyworks, your commission on this trade, each contract would then yield $231 and your broker would charge a $500 maintenance fee, making your investment $269 ($500 – $231).  If GPN closes at any price above $100 on September 15, 2017, both options would expire worthless, and your return on the spread would be 86% (744% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates August 4, 2017

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry