For today’s trade of the day, we will be looking at a Daily Price chart for Boston Scientific Corporation (BSX), states Chuck Hughes of Hughes Optioneering.
Before breaking down BSX’s daily price chart let’s first review which products and services are offered by the company. Boston Scientific Corporation develops, manufactures, and markets medical devices for use in various interventional medical specialties worldwide. It operates through MedSurg and Cardiovascular segments.
The company offers devices to diagnose and treat gastrointestinal and pulmonary conditions; devices to treat various urological and pelvic conditions; implantable cardioverter and implantable cardiac resynchronization therapy defibrillators; pacemakers and implantable cardiac resynchronization therapy pacemakers; and remote patient management systems.
Now, let’s begin to break down the Daily Price chart for BSX. Below is a Daily Price Chart with the price line displayed by an OHLC bar.
Buy BSX Stock
The Daily Price chart above shows that BSX stock has been hitting new 52-Week Highs regularly over the past few trading days. Simply put, a stock does not just continually hit a series of new 52-Week Highs unless it is in a very strong bullish trend. The Hughes Optioneering team looks for stocks that are making a series of 52-Week Highs as this is a good indicator that the stock is in a powerful uptrend.
You see, after a stock makes a series of two or more 52-Week Highs, the stock typically continues its price uptrend and should be purchased. Our initial price target for BSX stock is 55.00 per share.
81.2% Profit Potential for BSX Option
Now, since BSX stock is currently making a series of 52-Week Highs this means the stock’s bullish rally will likely continue. Let’s use the Hughes Optioneering calculator to look at the potential returns for a BSX call option purchase. The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat BSX price to a 12.5% increase.
The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following BSX option example, we used the 1% Rule to select the BSX option strike price but out of fairness to our paid option service subscribers, we don’t list the strike price used in the profit/loss calculation.
Trade with Higher Accuracy
When you use the 1% Rule to select a BSX in-the-money option strike price, BSX stock only has to increase by 1% for the option to break even and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if BSX stock is flat at 48.07 at option expiration, it will only result in a 7.0% loss for the BSX option compared to a 100% loss for an at-the-money or out-of-the-money call option.
Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options.
The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks. The prices and returns represented below were calculated based on the current stock and option pricing for BSX on 3/22/2023 before commissions.
When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price. For this specific call option, the calculator analysis below reveals if BSX stock increases 5.0% at option expiration to 50.47 (circled), the call option would make 37.1% before commission.
If BSX stock increases 10.0% at option expiration to 52.88 (circled), the call option would make 81.2% before commission and outperform the stock return by more than eight to one. The leverage provided by call options allows you to maximize potential returns on bullish stocks. The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.