I would like to make a suggestion on a stock that is breaking out.
The stock is CVS Health Corp. (CVS)
CVS is trading around $69.75 as I write this.
I am going to suggest a debit spread and trade the January 8th expiration day.
This gives CVS a few weeks to make a move higher.
Here is how you open the position:
Buy to Open January 8th - $70.00 Call for $2.35
Sell to Open January 8th - $75.00 Call for $.85
The net debit will be $1.50 per spread.
Based on the tracking portfolio, I suggest you limit the trade to a 6 lot or .9% of the portfolio.
The maximum gain on a six lot would be about $2,100 or 233%.
CVS has to move above $75 to earn maximum profit.
I am limiting the trade to under 1% of the nominal portfolio because it is just out of the money.