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You Want This Stock In Your Portfolio

Published 09/12/2016, 03:30 PM
Updated 07/09/2023, 06:31 AM
STZ
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Constellation Brands (NYSE:STZ) has done nothing but go up. The chart below shows the last 3 years of price action on a weekly timeframe. Yes it has had some periods where it went up fast and others when it consolidated -- and even other periods when it has pulled back. But in general, the price has moved from the lower left to the upper right portion of the chart.

Constellation Brands

This is the type of stock you want to have in your portfolio. You could go out and buy it and sit back and watch. But I have noticed that the stock does go through retrenchments that might give a better entry point. The chart shows that the price has pulled back to the rising 50-week SMA a few times when it has then bounced and started higher. It may or may not do that again. There is a potential catalyst for a move when it reports earnings on October 5.

To take advantage of this you can use an options strategy known as a 1×2 Put Spread. In this trade you buy a Put and then sell two of a lower strike Put. For Constellation Brands look at the October 160/155-150 1×2 Put Spread. This is buying the October 160 Put for about $3.50 and then selling both the October 155 Put for $2 and the October 150 Put for $1.15. The total cost is 35 cents.

This trade would participate in any pullback to 155 and then give an entry to the stock should it fall under 150, but with a basis of 145. Would you like to own Constellation Brands at $145?

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