Options Traders Doubled Their Money on This Surging Dow Stock

A flurry of upgrades and price-target hikes powered PG higher

by Patrick Martin

Published on Mar 14, 2019 at 12:57 PM

Subscribers to Schaeffer's Weekend Trader Series service doubled their money with the Procter & Gamble Co (NYSE:PG)  April 87.50 call. Here's a quick look at why we expected a big upside move from the Dow stock, and how the profitable options trade unfolded.

When we entered the position on Monday, Jan. 7, PG was fresh off a then-record high of $96.89 from mid-December, a milestone hit even as the broader equities market struggled. To start 2019, the shares had pulled back to the $92 level, which marked their early 2017 highs and 2017 close. It seemed like an optimal entry point for PG's next rally higher. 

The stock's solid technical strength was not met with much love from analysts. More than half the brokerages following the blue chip maintained tepid “hold” or “strong sell” opinions, and the consensus 12-month price target of $90.88 represented a discount to its Jan. 4 close. A round of upgrades and price-target hikes seemed overdue, and could help bolster PG shares.

There was also skepticism to be unwound in the options pits. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity’s 10-day put/call volume ratio of 2.07 was in the 98th percentile of its annual range, pointing to a healthier-than-usual appetite for long puts over calls. An exodus of option bears was ready to be a boon for PG.

In the wake of our recommendation, PG stock extended its run higher thanks to a post-earnings bull gap in late-January. This was followed by a steady stream of upgrades and price-target hikes. In fact, the security nabbed another record high yesterday, hitting $101.59, and allowing us to close our position and lock in a 100% profit.

Trade Postmortem PG

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