January 18th,

2024
Edition

SPX Monthly Chart

On December 29th, the
S&P posted another
end of the month
close above the
monthly moving
average line. This is a
continued bullish
signal.
Today will look at one
stock purchase, a call
purchase, and two
option debit spreads.

GHM
The first profit opportunity is a stock purchase in GHM, or Graham Corporation. GHM
designs and builds vacuum and heat transfer equipment for process industries and
energy markets worldwide.
GHM Monthly Chart
WT
The monthly chart
shows that GHM closed
above the monthly
moving average line
every month since
October 2022. If the
stock price is above the
moving average line, the
trend is up.
 GHM Daily Chart

The daily chart shows that

GHM has been forming a
pattern of higher highs and
higher lows since the May
low. The bullish pattern
points to a further advance.
We recommend buying
GHM stock at the current
price level. The GHM
dividend yield is 3.27%.

IR
The next profit opportunity we will review this week is a call purchase in Ingersoll
Rand Inc. IR is a global industrial company, with expertise in industrial and mission-
critical flow creation technologies.
IR Monthly Chart

The monthly chart shows

that IR has been in an
overall bull trend since the
chart started. After closing
below the moving average
line in October, IR bounced
right back and closed above
the moving average line and
reaffirmed the bull trend in
November.
The daily chart shows that IR has been mostly trading inside the Upper Keltner
Channel or higher since November. The next targets are 90 and 100.

IR Daily Chart
As we said above, we want
to buy a call in IR. We will
first look at selecting a call
option strike price for
purchasing an IR Call. IR is
currently trading at 78.18.
Let’s look at buying the IR
February 16 70-Strike Call.
The Feb. 16 options expire
in 28 days.

The Call Option Purchase calculator will calculate the profit potential for a call option
purchase trade based on the price change in the underlying stock/ETF at option
expiration in this example from a 12.5% change in stock price to a flat stock price.
We developed what we call the 1% Rule to help us select an option strike price. The 1%
rule says to limit the time value portion of the option to less than 1% of the stock/ETF
price. If you limit the time value portion of an option to 1%, the stock price only
has to move 1% for the option contract to break even and start profiting.
The calculator will also calculate the time value portion of an option. With this option
purchase, the time value is 0.52 points (boxed in red). The time value of 0.52 is less
than 1% of the 78.18 stock price, so this strike price qualifies under the 1% Rule.

The second row from

bottom of the calculator
Buy to Open the IR Feb 16 70-Strike Call
lists the dollar profit
potential. The bottom row
lists the percent return
profit potential. We can see
that if the IR stock price
increases 1% at option
expiration (boxed in green)
a 3% or $26 profit will be
realized. This confirms the
1% Rule of profiting with
only a 1% increase in the
stock price.
 Buy to Open the IR Feb 16 70-Strike Call
There is no limit on the
profit potential of a call
option purchase if the •
underlying stock
continues to increase in
price. If IR increases 10%
between now and option
expiration, the Call Option
Purchase Calculator shows
that the 70-strike call will
realize an 83.9% or $730
profit (boxed in green).
On the other hand, if IR remains flat at option expiration, the 70-Strike Call will only
lose -6% or -$52. Remember, if you purchase an at-the-money or out-of-the-money
option and the underlying stock/ETF is flat or down at option expiration, it could
result a 100% loss for your option trade! Using the 1% Rule to select an option strike
price can increase your percentage of winning trades compared to trading at-the-
money or out-of-the- money strikes and this higher accuracy can make you a more
successful trader.
We recommend buying the IR Feb 16 70-Strike Call at current prices.

BBIO
The next profit opportunity we will consider this week is in BBIO, or BridgeBio Pharma
Inc. BBIO discovers, develops, and innovates drugs for genetic diseases.

BBIO Monthly Chart

The monthly chart shows

that BBIO has been above
the moving average line
since January 2023. The
next targets are 45 and 50.
 BBIO Daily Chart
The daily chart shows that
BBIO has been trading inside
the Upper Keltner channel or
higher since November. This
month’s dip back inside the
Keltner Channel gives us a
buying opportunity.
We are going to review a call
debit spread for BBIO.
Traders who want a more
leveraged approach can buy
BBIO calls.

Buy to Open the BBIO Mar 15 30-Strike Call

Sell to Open the BBIO Mar 15 35-Strike Call
We can see from this
call option spread
analysis that the
spread will make a
53.8% or $175 profit if
the BBIO stock price
declines by -.5%,
remains flat, or
increases in price
when the options
expire. If BBIO is
down -7.5% at
expiration, the trade
will make 45.9% or
$149.

BLDR
The last profit opportunity we will review is in BLDR, or Builders FirstSource, Inc.
BLDR is the largest U.S supplier of building products, prefabricated components, and
value-added services to the professional market segment for new residential
construction and repair and remodeling.
 BLDR Monthly Chart

The monthly chart shows that

BLDR has gone from below 55
at the September 2022 low to
over 170 last month. The next
targets are 180 and 200.

BLDR Daily Chart

The daily chart shows that
BLDR has been going almost
straight up since the October
2023 low. A further advance is
expected.
We are going to review a Call
Debit Spread trade for BLDR.
Traders who want a more
leveraged approach can buy
BLDR calls.

Buy to Open the BLDR Mar 15 145-Strike Call

Sell to Open the BLDR Mar 15 155-Strike Call

We can see from this Call

Option Spread Analysis that if
the BLDR stock price declines
by -5%, remains flat, or
increases in price when the
options expire, the spread will
make a 36.1% or $265 profit.
The profits slide down from
there. If BLDR is down -7.5% at
expiration, the trade will make
12.3% or $90.
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This week we recommended the following:

Buy GHM Stock
Buy to Open the IR Feb 16 70-Strike Call
Buy to Open the BBIO Mar 15 30-Strike Call
Sell to Open the BBIO Mar 15 35-Strike Call
Buy to Open the BLDR Mar 15 145-Strike Call
Sell to Open the BLDR Mar 15 155-Strike Call

Note: Profit performance displayed in this newsletter does not include

commission cost. Prices are based on Thursday End of Day.

We’ll see you next

week!