Please ensure Javascript is enabled for purposes of website accessibility
Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 180

Monday, shortly after the market open, we exited the stock components of three of our June covered call positions (FNKO, IGT, RRC). With these sales, here are our profits for all four June positions:

Cabot Profit Booster 180

Monday, shortly after the market open, we exited the stock components of three of our June covered call positions (FNKO, IGT, RRC). With these sales, here are our profits for all four June positions:

Funko (FNKO) – Lost $108 on the stock, but made $198 on the call, or a profit of $90 (yield of 4.47%)

International Game Technology (IGT) – Profit of $28 on the stock, and $140 on the call, or a profit of $168 (yield of 7.79%)

Progyny (PGNY) – Profit of $300 on our trade (yield of 5.26%)

Range Resources (RRC) – Loss of $58 on the stock, but made $81 on the call, or a profit of $23 (yield of 1.65%)

I’m pleased with these profits, ranging from 1.65% to 7.79%, as the market essentially went nowhere in the month of May, and through the first three weeks of June.

With the exit of these four positions, we now only own two covered calls (MRO/GPRO) and today we are going to add a stock that is breaking out to recent highs from the gaming sector.

The Stock – Scientific Games (SGMS)
Why the Strength
Scientific Games is a long-time technology provider for lotteries and casinos. Lately it has jumped into sports betting, which is rapidly opening up as U.S. states look to raise tax revenue from legalizing an activity that has been large (perhaps $150 billion annually) but mostly outside the law.

The move toward legalization has been so swift that companies are scrambling to ink deals and secure market share. For its part, Scientific Games bought a closely held betting tech outfit, SportsCast, at the end of May.

Its technology allows for instant pricing of up to 12,000 different bets a second. That’s important because serious bettors want to be able to place multiple bets quickly and because sportsbooks see their future as being able to offer many small in-game bets (i.e. will the next pitch be a strike?) as opposed to just betting once ahead of an event. Scientific Games is working quickly on capitalizing on SportsCast, following up with a Wynn Resorts deal to be its tech provider for sports betting in three states.

Right now, sports wagering is legal in some manner in 28 states, but that figure is growing with more jurisdictions, as well as Ontario, moving toward legalizing sports bets in some form. Scientific Games already was performing well as a reopening play: Q1 results saw revenues grow from a year-ago for the first time in a while, and the loss of 16 cents was 32 cents better than expectations and miles better than last year.

The reopening benefit is probably baked into the stock already, but the potential of sports betting should provide the tailwinds for growth. This year, the company should be able to turn a net profit of 49 cents a share, with a huge earnings surge coming in 2022.

Technical Analysis
SGMS shares have had a huge post-crash move during the past year, but it’s the action of the past few months that we’re keying off of. After a big shakeout in March, the stock went bananas, rising 10 of 11 weeks on solid volume, pushing to all-time highs in the process. Moreover, the dip last week while reopening/cyclical stocks were falling apart was tame. Stop — 62

CPB_Issue_06-22-21_SGMS

The Covered Call Trade
Buy Scientific Games (SGMS) Stock at 76, Sell to Open July 75 Strike Calls (exp. 7/16) for $4.40, or a Net Price of 71.6 or less

Static Return: $340 per covered call (4.74%)

Breakeven: 71.6

Covered Call Return (if assigned): $340 per covered call (4.74%)

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 71.6 or less. (In this case 76 minus 4.40 = 71.6. Or another example is you could pay 76.2 for the stock and sell the call for 4.60, which also equals 71.6)

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
If our stop is hit, I will send an alert giving detailed instructions on how to exit the trade. But don’t get too worried about setting the stop. I will manage that for you.

Stock Name and SymbolPrice BoughtCurrent Stock PriceStopOption - Price of Call SoldCurrent Option Price
Marathon Oil (MRO)13.6013.3011.5July 14 -- $0.69$0.40
GoPro (GPRO)12.1811.4010.5July 13 -- $0.55$0.20

The next Cabot Profit Booster issue will be published on June 29, 2021.

Cabot Wealth Network
Publishing independent investment advice since 1970.

President & CEO: Ed Coburn
Chief Investment Strategist: Timothy Lutts
Cabot Heritage Corporation, doing business as Cabot Wealth Network
176 North Street, PO Box 2049, Salem, MA 01970 USA
800-326-8826 | support@cabotwealth.com | CabotWealth.com

Copyright © 2021. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website.

Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change.