Saying Goodbye to a Big Winner - and Soccer Season
This past weekend my daughter finished a great year of travel soccer. And while I complained constantly about the practices that went until 8:30 at night several times a week, and were often held in the pouring rain, I do recognize the value of all the blood, sweat and tears that went into the season.
More importantly, I cherish the lifelong friendships my daughter made during the 150 practices and games played in the last year. While I am fairly emotionless when it comes to much of my life, I was genuinely sad to see the season end. I felt a (somewhat) similar emotion over a recent options trade: selling my Nutanix (NTNX) position for a huge profit.
The best traders in the world have no emotions when it comes to investing. They sell without hesitation if their stop is hit. But it’s tough to be completely emotionless, especially when you have found a stock that you really believe in. Many investors think of a big winning position as a member of their investing family. But as Cabot’s chief investing strategist Tim Lutts often says, “If a stock isn’t doing what you hired it to do, get rid of it.”
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And while my NTNX position was still performing, my trading rules said it was time to sell. Following my NTNX sale, which I advised subscribers to my Cabot Options Trader advisory to do as well, I received several emails like this one: “What a fantastic call on Nutanix, Inc! I had a nine-bagger on that trade!”
How can you not be emotional about a stock when you get emails like that!
I haven’t necessarily said goodbye to NTNX forever. I could still get back into a position if the setup is right again.
My Next Big Options Trade
That said, for now I have moved on to a new position in Axon Enterprises (AAXN) that I think has similar upside potential, and is a favorite of Cabot analysts Mike Cintolo and Tim Lutts. Here’s what Tim had to say about Axon in a recent issue of his Cabot Stock of the Week advisory:
“The reason the stock is very strong has to do with excitement surrounding its new products, and its overall shift to a steadier, higher-margin recurring revenue business model.
“Specifically, Axon seems to have a hit on its hands with its cameras (both body-worn and in-car), which are becoming very popular among police departments; the company says about three dozen U.S. cities are using them, and they’ve seen a huge reduction in the number of complaints from citizens as a result. And those figures are growing—over the past two months, Axon announced a 400-camera order from the Chicago police, an order for 1,060 cameras from Virginia Beach and a whopping 11,000 cameras from Australia’s Victory Police.”
(To read more of Tim’s great analysis on AAXN in Cabot Stock of the Week, click here.)
I see AAXN as a great, low-risk opportunity to buy calls. Here’s why it’s so low-risk: if you wanted to buy 500 shares of AAXN today at 42, that would be a capital outlay of $21,000. However, if you bought five calls for $4 that would only be a capital outlay of $2,000, and would give you similar upside exposure. Because of its low-risk/high-upside potential, I recently recommended a call purchase in AAXN to my Cabot Options Trader subscribers.
I don’t necessarily LOVE my AAXN options trade as much as I loved my NTNX one. Yet. Despite the VERY bullish AAXN trading my options scanner picked up on just a couple days ago, if the market has topped there is certainly a chance that this trade will fail. And if that is the case, I will be emotionless if I have to sell.
But if the market takes off again, there’s a chance that a few months from now I’ll be as nostalgic about selling AAXN at a profit as I am about my daughter’s soccer season ending.
To learn more about what AAXN calls I recommend buying right now, click here.
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