• Screw Up All Of Your Trades And Still Bank Monthly Gains The Perfect Trading Strategy for risk-averse conservative traders who want consistent, predictable and reliable weekly and monthly income from trading stocks… even when… they are 100% WRONG on every trade. Over a recent 30-day period, a well-known trader used this conservative trading technique to earn a substantial $13,241.50. He explains everything (and shows you the PROOF) in his just-released video report. I won’t leave this video up forever. So watch now because you’re about to discover some things about active trading for weekly and monthly income you’ve never seen before.

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This Stock Could Be the Best Economic Indicator

This Stock Could Be the Best Economic Indicator

dollar tree

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  • Stocks, in general, are considered to be leading indicators of the economy. That’s because the earnings of the companies that make up the stock market, as a group, reflect economic growth and stock market investors base buy and sell decisions on earnings prospects for the future.

    Some individual companies or sectors deliver a more refined view of economic growth. For example, according to Quartz.com, “the US middle class is disappearing, which makes dollar stores very happy.”

    The report noted, “Dollar General CEO Todd Vasos puts it in the cold, hard terms of the stock market. The “middle-class continues to go away, unfortunately, to the lower end of the economic scale versus the higher end,” he said at a Goldman Sachs retailing conference in September.

    • Screw Up All Of Your Trades And Still Bank Monthly Gains The Perfect Trading Strategy for risk-averse conservative traders who want consistent, predictable and reliable weekly and monthly income from trading stocks… even when… they are 100% WRONG on every trade. Over a recent 30-day period, a well-known trader used this conservative trading technique to earn a substantial $13,241.50. He explains everything (and shows you the PROOF) in his just-released video report. I won’t leave this video up forever. So watch now because you’re about to discover some things about active trading for weekly and monthly income you’ve never seen before.

    “So as this economy continues to chug along and creates more of our core customer, I think there’s going to be more and more opportunities for us to get in and build more stores.”

    The CEO noted that the average customer:

    Is a woman living in a two income household, making $40,000 per year before taxes with disposable income of about $800 a year. The tight family budgets of many consumers explained the store’s growth.

     

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  • retail stock growth

    Source: QZ.com

    That makes the recent earnings report from Dollar Tree (Nasdaq: DLTR) troubling.

    Weaker Than Expected Results

    According to Zacks, DLTR reported lower-than-expected results in the second quarter of its fiscal year. However, both earnings and sales improved year over year. Further, management issued guidance for the third quarter and updated outlook for the fiscal year.

    Dollar Tree’s quarterly adjusted earnings grew 16.2% to $1.15 per share but missed the Zacks Consensus Estimate by a penny. Also, it came near the top end of the company’s guided range of $1.07-$1.16 per share.

    Consolidated net sales were up 4.6% to $5,525.6 million in the quarter. However, the reported figure came below the Zacks Consensus Estimate of $5,537 million.

    At the end of the quarter, Dollar Tree operated 15,073 stores in 48 states and five Canadian provinces.

    As part of the earnings announcement, management updated guidance for the third quarter and for the full fiscal year.

    “It forecasts consolidated net sales for the third quarter in the band of $5.53-$5.64 billion, with low single-digits comps growth. Earnings are envisioned in the range of $1.11-$1.18 per share.

    For fiscal 2018, it projects consolidated net sales in the range of $22.75-$22.97 billion compared with 22.73-$23.05 billion guided earlier. Comps are still anticipated to grow low single-digits along with 3.4% rise in square footage.

    But, management projects incurring a charge of 4 cents per share in the fiscal fourth quarter owing to anti-dumping duty imposed on certain ribbon bought from China. Consequently, earnings per share for the fiscal year are now envisioned in the band of $4.85-$5.05 compared with previous guided range of $4.80-$5.10.

    The Zacks Consensus Estimate for third quarter earnings is pegged at $1.19 and for the fiscal year it stands at $5.55.”

    Traders sold the stock on the news.

    Source: QZ.com

    That makes the recent earnings report from Dollar Tree (Nasdaq: DLTR) troubling.

    Weaker Than Expected Results

    According to Zacks, DLTR reported lower-than-expected results in second quarter of its fiscal year. However, both earnings and sales improved year over year. Further, management issued guidance for the third quarter and updated outlook for the fiscal year.

    Dollar Tree’s quarterly adjusted earnings grew 16.2% to $1.15 per share but missed the Zacks Consensus Estimate by a penny. Also, it came near the top end of the company’s guided range of $1.07-$1.16 per share.

    Consolidated net sales were up 4.6% to $5,525.6 million in the quarter. However, the reported figure came below the Zacks Consensus Estimate of $5,537 million.

    At the end of the quarter, Dollar Tree operated 15,073 stores in 48 states and five Canadian provinces.

    As part of the earnings announcement, management updated guidance for the third quarter and for the full fiscal year.

    “It forecasts consolidated net sales for the third quarter in the band of $5.53-$5.64 billion, with low single-digits comps growth. Earnings are envisioned in the range of $1.11-$1.18 per share.

    For fiscal 2018, it projects consolidated net sales in the range of $22.75-$22.97 billion compared with 22.73-$23.05 billion guided earlier. Comps are still anticipated to grow low single-digits along with 3.4% rise in square footage.

    But, management projects incurring a charge of 4 cents per share in the fiscal fourth quarter owing to anti-dumping duty imposed on certain ribbon bought from China. Consequently, earnings per share for the fiscal year are now envisioned in the band of $4.85-$5.05 compared with previous guided range of $4.80-$5.10.

    The Zacks Consensus Estimate for third quarter earnings is pegged at $1.19 and for the fiscal year it stands at $5.55.”

    Traders sold the stock on the news.

    DLTR daily chart

    A Trading Strategy to Benefit from Potential Weakness

    The prospects of further short-term gains in DLTR seem to be remote.  But, significant weakness is also unlikely. Traders should consider using an options strategy known as a bear put spread to benefit from the expected trading range in the stock.

    This strategy can be profitable when a trader is looking for a steady or declining stock price during the term of the options. The risks and potential rewards of this strategy are illustrated in the payoff diagram shown below.

    bear put spread

    Source: The Options Industry Council

    A bear put spread consists of buying one put and selling another put at a lower exercise price to offset part of the initial cost of the trade. This trading strategy generally profits if the stock price moves lower. The potential profit is limited, but so is the risk should the stock unexpectedly rally.

    The Trade Specifics for DLTR

    The bearish outlook for DLTR, at least for the purposes of this trade, is a short-term opinion. To benefit from this outlook, traders can buy put options.

    A put option gives the trader the right, but not the obligation, to sell shares at a specified price until the option expire. While buying a put is possible, it can also be expensive.  The risk of loss when buying an option is equal to 100% of the amount paid for the option.

    To limit the risks, a second put can be sold. This will generate income that can offset the purchase price, potentially allowing a trader to buy a put with a higher exercise price. That increases the probability of success for the trade.

    Specifically, the November 16 $85 put can be bought for about $4.65 and the November 16 $82.50 put can be sold for about $3.22. This trade will cost about $1.43 to enter, or $143 since each contract covers 100 shares, ignoring the cost of commissions which should be small when using a deep discount broker.

    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 $143. This loss would be experienced if DLTR is above $85 when the options expire. In that case, both options would expire worthless.

    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 DLTR, the maximum gain is $1.07 ($85 – $82.50 = $2.50; $2.50 – $1.43 = $1.07). This represents $107 per contract since each contract covers 100 shares.

    Most brokers will require minimum trading capital equal to the risk on the trade, or $143 to open this trade.

    That is a potential gain of about 74% of the amount risked in the trade. This trade delivers the maximum gain if DLTR closes below $82.50 on November 16 when the options expire.

    Put spreads can be used to generate high returns on small amounts of capital several times a year, offering larger percentage gains for small investors willing to accept the risks of this strategy. Those risks, in dollar terms, are relatively small, about $143 for this trade in DLTR.

    You can find more trades like this in the TradingTips.com service, Options Cash Cow. To learn more, click here.

     

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