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 November 30th, 2023 Upward Buying Pressure for AIG Dear Reader, Yesterday, we looked at a Daily Price Chart of Brown & Brown, Inc., noting the stock is currently trading below the Upper Keltner Channel in the 'Buy Zone'. For today's Trade of the Day we will be looking at an On Balance Volume chart for American Intl Group, Inc. stock symbol: AIG. Before breaking down AIG's OBV chart let's first review which products and services are offered by the company. American International Group, Inc. offers insurance products for commercial, institutional, and individual customers in North America and internationally. It operates through General Insurance, and Life and Retirement segments. The General Insurance segment provides commercial and industrial property insurance, including business interruption and package insurance that cover exposure to made and natural disasters; general liability, environmental, commercial automobile liability, workers' compensation, excess casualty, and crisis management insurance products; and professional liability insurance. Confirming a Price Uptrend with OBV The AIG daily price chart below shows that AIG is in a price uptrend as the current price is above the price AIG traded at six months ago (circled). The On Balance Volume chart is below the daily chart. On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line. On Balance Volume Indicator ● When Close is Up, Volume is Added ● When Close is Down, Volume is Subtracted ● A Cumulative Total of Additions and Subtractions form the OBV Line Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. We can see from the OBV chart below that the On Balance Volume line for AIG is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability. The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price uptrend.  Confirmed 'Buy' Signal for AIG Since AIG's OBV line is sloping up, the most likely future price movement for AIG is up, making AIG a good candidate for a stock purchase or a call option purchase. Let's use the Hughes Optioneering calculator to look at the potential returns for an AIG call option purchase. The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat AIG price to a 12.5% increase. The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following AIG option example, we used the 1% Rule to select the AIG option strike price but out of fairness to our paid option service subscribers we don't list the strike price used in the profit/loss calculation. Trade with Higher Accuracy When you use the 1% Rule to select an AIG in-the-money option strike price, AIG stock only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if AIG stock is flat at 64.83 at option expiration, it will only result in a 3.6% loss for the AIG option compared to a 100% loss for an at-the-money or out-of-the-money call option. Using the 1% Rule to select an option strike price can result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options. The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks. The prices and returns represented below were calculated based on the current stock and option pricing for AIG on 11/29/2023 before commissions. When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock continues to move up in price. For this specific call option, the calculator analysis below reveals if AIG stock increases 5.0% at option expiration to 68.07 (circled), the call option would make 49.9% before commission. If AIG stock increases 10.0% at option expiration to 71.31 (circled), the call option would make 103.5% before commission and outperform the stock return more than 10 to 1*. The leverage provided by call options allows you to maximize potential returns on bullish stocks. The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.  Interested in accessing the Optioneering Calculators? Join one of Chuck's Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade. Get Trade Insights Directly From Chuck You can start getting market insights directly from 10-Time Trading Champion Chuck Hughes. See what he's trading and when with his exclusive Weekly Option Alert Trading Service where he will send you his hand-picked stock and option trades. Just call us at 1-866-661-5664 or 1-310-647-5664 to join or CLICK HERE to schedule a call! Wishing You the Best in Investing Success,  Chuck Hughes Editor, Trade of the Day Have any questions? Email us at dailytrade@chuckstod.com *Trading incurs risk and some people lose money trading.   See Related ArticlesBRO: 'Buy Zone' Alert Indicated PowerTrend 'Buy' Detected for CYBR Built In 53.8% Profit Opportunity  © 2023 Tradewins Publishing. All rights reserved. | Privacy Policy | Terms and Conditions | Contact Us If you didn't create an account using this email address, please ignore this email or unsubscribe using the link below. To ensure delivery of this email to your inbox and to enable images to load in future mailings, please add todaystrade@chuckstod.com to your e-mail address book or safe senders list. DISCLAIMER: Auto-trading, or any broker or advisor-directed type of trading, is not supported or endorsed by Legacy Publishing LLC. For additional information on auto-trading, you may visit the SEC's website: All About Auto-Trading. The information provided by the Legacy Publishing LLC ("Legacy") Trading Services, newsletters and educational publications ("Services") is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by Legacy a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. Past performance is not necessarily indicative of future results. Please note that results may not be typical and can vary from person to person. There are inherent risks involved with investing in the stock and options market, including the loss of your investment. Any investment is at your own risk. You should only trade or invest your "risk capital" – money you can afford to lose. | |||
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