Cabot Profit Booster 106

The Stock – Fortinet (FTNT)

Last year, there were at least 7.9 billion records—including credit card numbers, home addresses, phone numbers and other highly sensitive information—that were compromised by computer hacks, mainly through invasions of business networks. That’s why the global cybersecurity market amounted to some $161 billion last year, but is expected to more than double (to $363 billion) by 2025, a mid-teens annual growth rate. And some think even that could prove conservative, as the launch of 5G and the rapid growth of Internet of Things take hold, both of which will create more devices and opportunities for hackers—and a greater need for protection. Among the new-age players in the field, Fortinet is one of the bigger beneficiaries, as it provides a wide range of integrated, automated cybersecurity solutions worldwide.

The sex appeal isn’t super high, but Fortinet is a proven outfit with a history of pulling the right levers, which, combined with the positive industry trends, has big investors clicking the buy button.

Technical Analysis

FTNT based out for a year starting in October 2018, then took off before and (mostly) after earnings on November 1. It had a couple of small pullbacks in December, and it nearly tested its 10-week line around year-end, but it’s started 2020 with a bang, pushing to new highs. A normal dip would look buyable to us. Stop - 104

The Covered Call Trade

Buy Fortinet (FTNT) Stock at 117, Sell February 120 Calls (exp. 2/21/2020) for $4, or a Net Price of 113 or less

Static Return: $400 per covered call (3.53%)

Breakeven: 113

Covered Call Return (if assigned): $700 per covered call (6.19%)

Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.

However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the Net Price, or 113 or less. (In this case 117 minus 4 = 113. Or another example is you could pay 117.5 for the stock and sell the call for 4.5, which also equals 113)

For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …

Open Positions

Please note Friday is expiration of our January position in Axon (AAXN) and Pan American Silver (PAAS). I will send a special bulletin Friday morning with how we will manage these positions.