Special: NEW: Top 6 Stocks to Buy Now

  • Facebook
  • Twitter
  • Podcast
Top

Another Obvious Coronavirus Beneficiary With a Possible Gain of 59%

Another Obvious Coronavirus Beneficiary With a Possible Gain of 59%

Trade summary: A bull call spread in Teladoc Health, Inc. (NYSE: TDOC) using the April 17 $140 call option which can be bought for about $11.85 and the April 17 $145 call could be sold for about $9.92. This trade would cost $1.93 to open, or $193 since each contract covers 100 shares of stock.

  • Special: How You Could Lock in a 261.42% Return on THIS Stock in Just Four Days
  • In this trade, the maximum loss would be equal to the amount spent to open the trade, or $193. The maximum gain is $307 per contract.  That is a potential gain of about 59% based on the amount risked in the trade.

    Now, let’s look at the details.

    Coronavirus is changing many aspects of every day life and the stock market is reacting to that. Some companies may not survive in the new normal while others that were strong performers could be the stars of the post-coronavirus economy,

    Among the possible stars, as a recent GlobeNewswire highlighted.

    “Teladoc Health, the global leader in virtual care, today shared that the company is experiencing unprecedented daily visit volume in the United States as the novel coronavirus continues to spread globally. This week, patient visit volume spiked 50 percent over the prior week and continues to rise.

  • Special: Same Stock… Every Year… Possible Gains Up to 357%
  • “We are seeing more patients … consistent with peak flu volumes, but [this week] began to see that number accelerate to as much as 15,000 visits requested per day.

    Teladoc Health has provided approximately 100,000 virtual medical visits to patients in the United States in the past week, helping to alleviate pressure on the broader health care system,” said Lew Levy, MD, chief medical officer, Teladoc Health.

    “As we saw during the flu epidemic of 2018, a community’s healthcare system can become overwhelmed and virtual care can help provide needed relief.

    We have the unique ability to immediately connect with the CDC and other government agencies, to add the right screening tools and clinical quality protocols to our system, and most importantly, to keep patients – particularly those most at risk with underlying health conditions – out of care settings where they can face exposure.”

    The demand for virtual care visits has accelerated as several health plans have waived consumer cost sharing and public health officials at all levels of government have encouraged the public to take advantage of virtual care services.

    These actions have driven many people to use telemedicine for the first time, with more than half of all the Teladoc Health visits this month being from first time users.

    “The traditional health care system simply does not have the capacity to address a worst-case scenario when it comes to the coronavirus,” said Mark Smith, MD, professor of clinical medicine at the University of California at San Francisco (UCSF) and member of the Teladoc Health board of directors.

    “The good news is that we have never been better able to address this challenge because of companies like Teladoc Health, that bring high-quality, affordable virtual care to every individual who needs care while reducing community exposure.”

    TDOC has been volatile along with the broad stock market. The stock recently pulled back.

    TDOC daily chart

    Unlike many stocks, the pullback has been orderly and stopped near the lower Bollinger Band. The stock is also now on a stochastocs buy signal, indicating that momentum has likely turned.

    TDOC daily chart

    A Specific Trade for TDOC

     For TDOC, the April 17 options allow a trader to gain exposure to the stock. This trade will be open for about six weeks and allows for traders to turn over capital quickly, potentially compounding gains several times a year.

    An April 17 $140 call option can be bought for about $11.85 and the April 17 $145 call could be sold for about $9.92. This trade would cost $1.93 to open, or $193 since each contract covers 100 shares of stock.

    The amount paid to enter the trade is the largest possible loss on the trade. This is generally true whenever a trader is creating a debit to enter an options trade. “Creating a debit” means there is a cost to enter the trade. You could create a debit by simply buying puts or calls to open a directional trade.

    In this trade, the maximum loss would be equal to the amount spent to open the trade, or $193.

    The maximum gain on the trade is equal to the difference in exercise prices less the amount of the premium paid to open the trade.

    For this trade in TDOC the maximum gain is $3.07 ($145- $140= $5; $5 – $1.93 = $3.07). This represents $307 per contract since each contract covers 100 shares.

    Most brokers will require minimum trading capital equal to the risk on the trade, or $193 to open this trade.

    That is a potential gain of about 59% based on the amount risked in the trade. The trade could be closed early if the maximum gain is realized before the options expire.

    A Trade for Short Term Bulls

    As with the ownership of any stock, buying TDOC could require a significant amount of capital and exposes the investor to standard risks of owning a stock.

    To reduce the risks of a trade, an investor could purchase a call option. This allows them to benefit from upside moves in the stock while limiting risk to the amount paid for the options. However, buying a call option can also require a significant amount of capital and includes the risk of a 100% loss.

    Whenever an option is bought, the maximum risk is always equal to 100% of the amount of spent to purchase the option. Since options cost significantly less than a stock, the risk in dollar terms will usually be relatively small to own an option.

    To further limit the risks of the trade, an investor could use a bull call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay for the cost of buying the first call. The spread strategy always reduces the risk of an options trade.

    This strategy is designed to profit from a gain in the underlying stock’s price but has the benefit of avoiding the large up-front capital outlay and downside risk of outright stock ownership. The potential risks and rewards of this strategy are summarized in the chart below.

    bull call spread

    A Specific Trade for TDOC

     For TDOC, the April 17 options allow a trader to gain exposure to the stock. This trade will be open for about six weeks and allows for traders to turn over capital quickly, potentially compounding gains several times a year.

    An April 17 $140 call option can be bought for about $11.85 and the April 17 $145 call could be sold for about $9.92. This trade would cost $1.93 to open, or $193 since each contract covers 100 shares of stock.

    The amount paid to enter the trade is the largest possible loss on the trade. This is generally true whenever a trader is creating a debit to enter an options trade. “Creating a debit” means there is a cost to enter the trade. You could create a debit by simply buying puts or calls to open a directional trade.

    In this trade, the maximum loss would be equal to the amount spent to open the trade, or $193.

    The maximum gain on the trade is equal to the difference in exercise prices less the amount of the premium paid to open the trade.

    For this trade in TDOC the maximum gain is $3.07 ($145- $140= $5; $5 – $1.93 = $3.07). This represents $307 per contract since each contract covers 100 shares.

    Most brokers will require minimum trading capital equal to the risk on the trade, or $193 to open this trade.

    That is a potential gain of about 59% based on the amount risked in the trade. The trade could be closed early if the maximum gain is realized before the options expire.

    A Trade for Short Term Bulls

    As with the ownership of any stock, buying TDOC could require a significant amount of capital and exposes the investor to standard risks of owning a stock.

    To reduce the risks of a trade, an investor could purchase a call option. This allows them to benefit from upside moves in the stock while limiting risk to the amount paid for the options. However, buying a call option can also require a significant amount of capital and includes the risk of a 100% loss.

    Whenever an option is bought, the maximum risk is always equal to 100% of the amount of spent to purchase the option. Since options cost significantly less than a stock, the risk in dollar terms will usually be relatively small to own an option.

    To further limit the risks of the trade, an investor could use a bull call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay for the cost of buying the first call. The spread strategy always reduces the risk of an options trade.

    This strategy is designed to profit from a gain in the underlying stock’s price but has the benefit of avoiding the large up-front capital outlay and downside risk of outright stock ownership. The potential risks and rewards of this strategy are summarized in the chart below.

  • Special: How You Could Lock in a 261.42% Return on THIS Stock in Just Four Days
  • Share