This week I have decided to try something different. Instead of writing a general overview of the market as I have been doing, instead I am going to give my analysis on a particular stock and the investment opportunities I believe it presents.
The stock that I believe presents the most opportunity this week is Chevron (CVX) I have had my eye on this company for a while, and I have noticed patterns in the stock which have it rise to around 125 a share and then fall to below 118 and then rise back up.
Using Put options I have been able to make an almost 50% profit in under a week, as the stock fell below 120. If you missed out on the downward trend of the stock this week, don't worry, next week as the stock falls to below 118 you could buy up call options on the stock, preferably call options offering to buy the stock at 119 or at a price slightly higher then the market price. Or if options are not your thing you could simply buy Chevron shares at 118. Either way you could profit as the stock rebounds and rises above 120-122.
Using this strategy you could easily make a large profit just in time for the new year. This is a short term play for those trying to make a quick buck and use the profit to buy your loved ones a nice gift for the holidays.
For those of you reading this who are not willing to risk your money in a short term investment into options, at 118 Chevron is the perfect stock to buy and hold through next year. At 118 the company will be trading at just 9 times earnings, which is way below the market average of 15. Also Chevron will no doubt be profiting from the shale energy boom in the U.S which would make the country the leading oil producer in 2014. Besides the attractive valuation and energy boom, Chevron is part of an energy sector that has been dramatically underperforming the rest of the stock market.
Chevron stock is up only 11.2% this year, compared to the S&P 500 which is up over 25%. While the rest of the market is overheated and in need of a correction Chevron and other energy stocks seem to be in a perfect position to rise through next year, especially as countries such as Mexico open up their oil markets to outside competition.
These factors point to a boom in energy stocks, so my analysis is to buy up shares in various oil companies like Chevron now , and watch them rise through next year.
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