27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
If you're considering to buy Union Pacific Corporation (NYSE: UNP) shares, it's a "tough time" to get in to the stock.
According to an analysis by Loop Capital Markets, nine out of 10 trades would have failed with an average loss of 18 percent, when the stock was trading between 17.5 and 18.5x its forward P/E. Unfortunately, "the key point is that this is where we are today: 17.6x."
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Analyst Rick Paterson noted investors who would have bought UNP on the 29 days it was trading below 12.5x forward consensus earnings would have made a one year profit every single time with an average return of 45 percent.
In fact, buying UNP below 15.5x almost always resulted in a positive investment with annual returns exceeding 24 percent, the analysis showed.
"It's at P/E's in excess of 15.5x, however, that things start to turn. Seventy-two percent of trades made between 15.5-16.5x were profitable at a still healthy 21%, including the losers," Paterson wrote in a note.
On the flip side, the analyst said trades between 16.5-17.5x were almost half unprofitable, generating a negligible average return of less than 4 percent, with the dividend contributing half of it.
As such, according to Paterson, it's not a good time to buy UNP, which is trading at current consensus forward P/E of 17.6x.
"Now clearly this is a simplistic backward looking analysis that ignores fundamentals; which we covered last week; but in our view still food for thought if you're contemplating buying Union Pacific stock anytime soon," Paterson concluded.
Paterson has a Hold rating and $93 price target on the stock, which closed Wednesday at $92.44.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.