When the stock markets started a correction on Feb. 2, halliburton (US:Hal) stock has already started its 7% slide of its earnings event. Then Hal tacked on another 15% with the rest of the stock for many titles from the tariff wars of geopolitical unrest.
Since mid-March, Hal was installed a strong rally by 15%, which is a statement on the quality of the product. Unfortunately, it becomes a habit in the warehouse. In February 2017, Hal also fell hard after earnings, but the correction was much deeper and perhaps would have lasted much longer. Apparently, this time the bulls are doing are above the lows of February of the current year. Therein lies my optimism.
Today, in my opinion, the worst is over Hal warehouse and has not yet come. But instead of betting on a strong rally, I am sure that support will hold over the next few months. But these are turbulent times for the stock, and I want to take the safe route with options.
This morning Hal management reported earnings and the reaction in the stock is less enthusiastic. Fell 2%, although they beat expectations. But these days, investors want more and yet they don’t want to give the company the benefit of the doubt.
Fundamentally, the company is not cheap from the traditional price-earnings ratio. So it’s hard to argue cost. But here is where investors need to assign a value to the quality management team and company history.
Technically, the shares and the 2014 highs and at the same time he strongly rejected 2016 lows. And I believe that most often, the extremes are usually errors, so somewhere in the middle is the truth. And here lies the opportunity to complete the transaction with halliburton stocks in this turbulent market.
Click to enlarge, and not to buy the stock at face value and leaving absolutely no room for error, I will use the options where I can create a buffer from the current price and your risk level. My main problem at the moment is a spike in prices for crude oil. Haliburton stock tends to trade in lockstep with crude oil, which has been on a tear at the end.
I’m afraid that I do not believe that the rally in oil based on the basic principles, and especially on unstable events in the middle East. Therefore, this increased level of energy prices may be temporary, so I would like to protect themselves from a potential let down which could drag Hal shares with him.
In addition, by using Hal I don’t even need a rally to make a profit. If my prophets are coming faster. But with my trade setup, I’m just Hal to be above my risk level and I keep my maximum profit. If the price falls below my puts, then I would own shares at a large discount from today’s prices.
Given the importance of the company, what will be the script I can manage to profitability.
Haliburton Stock Trading Ideas
Rate: sell Hal Jan 2019 $40 naked put for $1.10. This is a bullish trade where I have 85% theoretical chance to achieve maximum profits. Otherwise, I own shares and losses get below $38.90.
Selling naked puts carries great risk, especially for the stock as expensive and just as volatile as this one. For those who want to mitigate it, they can sell instead of the spread.
Alternative rate: to sell Hal Jan 2019 $40/$38 credit put spread. The spread has the same odds, but it would put a 15% return on risk. No trade demand rally on profit.
Since there are no guarantees when investing in stocks, I never risk more than I can afford to lose.
Find out how to generate income from options. Nicolas Chahine-managing Director SellSpreads.com. At the time of this writing, he has not held positions in any of the above securities. You can follow him as @racernic on Twitter and stocktwits.