Dear Fellow Trader:
I feel like I’m repeating myself quite a bit. But when a trade comes along that is so profitable — and so predictable — you don’t want to miss it. Over the last year, Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) has scooped up billions in a Texas-based oil-and-gas producer. And time and time again, it has produced win after win… after win for anyone paying attention.
Today, I’ll give you a free trade to celebrate Buffett’s latest buy — and then show you exactly how to properly manage it.
Ladies and gentlemen, I give you… the Buffett Buy Zone Trade.
Buffett’s Back
Over at Executive Payouts Unlimited, we monitor two important anomalies in the market. The first is momentum, which measures capital flowing in and out of the equity markets and individual sectors. When these readings turn red, we walk away and close trades.
But when things are “Green,” we take what the market gives us. We typically target a trade that has an 80% probability of profit combined with an expected return north of 14% in 45 days.
How do we pick the companies we want to trade?
By focusing on the activity of insider buys at the executive level. Our buying strategy isn’t really a buying strategy, though…
It’s a selling strategy. We sell credit spreads below the purchase price completed by the executive. So, when an American Express Co. (NYSE: AXP) board member bought shares in late October at nearly $146 each, we sold a spread to generate some gains.
We sold the Nov. 24 expiration, $146 strike AXP put, and purchased the Nov. 24, $144 AXP put for protection. We slapped down $175 in margin to earn $25 over three weeks — a 14.4% gain.
The trade closed on Nov. 24, with AXP much higher thanks to strong market momentum. But this is just one of many trades we’ve made by focusing on insider buying activity.
And there’s no bigger trade this year than the Warren Buffett trade.
Buffett’s OXY Buying
Occidental Petroleum Corp. (NYSE: OXY) is a Houston-based oil producer that has the largest amount of land in Texas’ Permian Basin. This oil-rich region produces the lion’s share of U.S. oil and natural gas.
Buffett has consistently bought this stock over the last 18 months between a range of $56 and $58 per share. He hasn’t bought it when it pushed above $70, patiently building his stake in the producer.
Berkshire Hathaway has regulatory approval to buy up to 50% of the energy giant. But they don’t do it all at once. They’ve stealthily built that position to more than 29% by waiting for the stock to pull back into this range.
On Dec. 11, Buffett’s firm bought another $588 million in OXY stock. Then on Dec. 19, Berkshire bought another $312 million in stock, this time at a higher average price than the previous week’s purchase.
How to Trade This Now
OXY popped another 2% Friday morning, bringing our two open trades on the company higher and helping us increase our probability of success as these trades close in the coming weeks.
Traders can take advantage of this by selling the Feb. 16, $57.50 put and buying the Feb. 16, $55 put.
The margin required is $212.00 to earn $38.00. It has an 80.1% probability of profit, according to OptionsProfitCalculator.com, and the expected return is 17.9%.
This trade has a little more risk than usual. But it has a nice blend of risk and reward. If you want to know how to properly manage it… And for access to the equity signals that tell us when to buy and when to sell, you need to sign up for Executives Payouts Unlimited.
This will give you a full suite of tools to manage high-probability trades, and ensure that you’re not taking any unnecessary risks.
Have a wonderful Christmas,
Garrett Baldwin
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
P.S. Want to See What Could Be the Best Stocks to Begin the New Year?
The time to prepare for some of the BEST trading opportunities of next year is right NOW… before the end of the year.
And we have ONE final week before we finally say goodbye to 2023.
Celeste Lindman has a plan to get in front of what could be some of the biggest moves in the stock market going into the new year.
Plus she’ll show you her go-to strategy for identifying which stocks could soar when Wall Street piles back into the market in January 2024.
