How We Select Our Trades
  1. We first look at a fundamental stock screen over the whole universe of stocks on the NYSE and NASDAQ.
    1. We are only interested in mid to large cap stocks. They are defined as stocks with a market capitalization of greater than 2 billion dollars. Large cap stocks tend to hold up better in uncertain times and rarely go out of business.
    2. We want stocks with a PEG ratio of no greater than 2. The PEG ratio is a stock’s Price to Earnings, divided by its growth rate. When the PEG of a stock is greater than 2 it signals that there is a good chance it is overvalued based on its fundamental.
    3. Any stock that satisfies our fundamental screen will be checked for negative news related to the stock or its industry. We also check to make sure it will not be reporting earnings during the option period being considered for the trade. Many times earnings will cause a great amount of price volatility, which can dramatically alter the momentum and market direction of a stock.
  2. Next we monitor the overall stock sector of any stock that comes up from our fundamental screen. We want stocks that are in a sector with either good upside price momentum or one that has formed a bottom.
  3. The stock candidates are then evaluated to determine their price position within their long term price cycle. We look at their price movement over a minimum of 3-5 years. We want stocks that are moving upward within their long term price cycle.
  4. If our stocks candidates meet the above criteria we then look to see where the price of the stock is with regard to its short term price channel and pricing cycle. We prefer stocks in the lower end of an established upward cycle.
Legal | Site Map CallsandLeaps LLC copyright 2008.