Stock looks great, now what?

One of the nice moves this week has been in $ONXX (ONXY Pharmaceuticals) that continued through today. Here is a Daily chart of what the action has looked like:

A nice Inverse Head ‘n Shoulder break yesterday with good continuation today. For those that are long, the question now becomes what the next step is to protect these recent gains.

Some traders use stops and there are a variety to choose from:

  • “mental” stops
  • programmed stops either by price or a percentage
  • trailing stop, one that adjusts automatically as price moves (up or down)

Another choice is to initiate an Option Collar, for those that trade in options. Since we are near the September option expiration date (this Friday) let me suggest this for the October expiration:

To initiate the Collar, do the following:

  • Sell 1 October 90 Call for 2.00 (bid/ask is currently 1.95/2.20)
  • Buy 1 October 80 Put for 2.70 (bid/ask is currently 2.50/2.90)
  • Do this for every 100 shares of stock you are long. This trade should be for a debit of $.70
  • This will cap the gain at $89.30 ($90 strike minus debit)
  • It provides protection on a move down through the $80 strike Put but will have some good value until expiration in October – if price stays above $80.

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