Welcome to Extreme Investor Network, where we provide unique and valuable insights into the world of investing. Today, we’re diving into the recent performance of Domino’s Pizza (DPZ) and exploring a potential trading strategy to capitalize on its current market behavior.
After a recent dip following mixed earnings, DPZ, like many other stocks, has started to climb back up. However, it seems to be hitting a roadblock around the $448 level, indicating a potential stall in its upward momentum. The Relative Strength Index (RSI) on the 9-month daily chart has turned downward, hinting at a possible “dead cat bounce.”
To take advantage of this bearish outlook, our expert, Nishant Pant, is implementing a bear call spread strategy. This strategy involves selling a $455 call option while buying a $460 call option to mitigate potential upside risk. With a high success probability of nearly 80%, this trade offers a premium of $145 and limited potential loss of $355.
While credit spreads like this offer consistent returns over time, it’s important to note that losses can negate gains if not managed properly. Implementing a robust risk management strategy by setting predefined levels to cut losses is crucial for long-term success in options trading.
At Extreme Investor Network, we emphasize the importance of disciplined risk management and offer unique trading insights to help you navigate the ever-changing market landscape. Stay tuned for more expert tips and strategies to enhance your investment portfolio.
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