Trumpcare is coming but its makeup, its directives, and its effects are a big unknown. Thus, at least in the early innings, the use of options as a trading vehicle to capitalize from the movement in stocks that will likely be affected by this new dynamic is sensible. In my most recent article, “Insurer’s Secret Weapon” found in the latest issue of Breakthrough Tech Profits, I lay out the full case for Trumpcare from both an insider’s and an investor’s viewpoint. But already, as I note below, the strategy of using options to trade Trumpcare is paying off handsomely by reducing risk through a smaller capital outlay and by providing excellent profits in short periods of time. Why not have the best of both worlds?

Best of Both Worlds – Sell Aetna Call and Buy United Healthcare Straddle

Trumpcare hasn’t hit the road yet but the health insurance stocks are moving as uncertainty rises. As a result I am recommending the sale of the April 17 120 Call Option (AET_170421C00120000) for a nice profit and the purchase of United Healthcare June 2017 Straddle. See below for full details on the trades.

Here is the reasoning behind the change in strategy: We bought the Aetna call on November 10 and just a week later it’s up over 40%. That’s a good week’s work anywhere, so we’ll take it and run to our next trade. But since the hard work for Trumpcare lies ahead and the outcome remains uncertain, the straddle on UNH should pay off once the story breaks, which could take weeks to months. That’s why, to buy us time, I recommended the June UNH option. So by taking quick profits on Aetna we’ve already profited from Trumpcare. And by owning the UNH straddle we are in excellent position to profit from future developments.

Rollins Inc: Revenue and Earnings Monster Moves Quietly Higher

I am changing my rating on Rollins Inc. to a HOLD. 

Shares of Rollins Inc. (NYSE: ROL), a global leader in pest control through well-known brands such as Orkin, have been slowly inching higher over the last few weeks. We bought the stock at $27.38 in February of 2016, and it closed at $32.38 on November 18, already posting a very respectable 18% return without the nominal dividend of $0.1 per quarter. As a result it’s a good time to raise our sell stop to $28 in order to start locking in profits.

And while I still like the stock, it’s important to understand what you own with Rollins. Indeed, what is little known and very underappreciated about this company is that it’s an earnings steamroller having posted 42 straight quarters of earnings and revenues. The streak continued with the most recent quarterly results, released October 25, in which the company delivered $424 million in revenues – a 6.1% increase – and 9.5% growth in earnings through its $0.23 per share.  Guidance for the year was unchanged with the company’s goal of growing through acquisitions and organically in order to increase market share. The bottom line is that this stock could be a big winner for patient investors.

HOLD Rollins Inc. (NYSE: ROL). Raise Sell Stop to $28.

Portfolio Update

As the end of the year approaches I will be looking to make the portfolio lean and mean in order to be able to fully capitalize from the Trumpcare developments that are certain to start after the inauguration.  Here are this week’s changes.

Changes this week:

EQUITIES

SELL Aetna April 17 120 Call Option (AET_170421C001200). Bought on 11/10/16 at $7.70. Closing price on 11/18/ 16 was $11.67. Gain of 51% as of the close on November 18, 2016.

HOLD Rollins Inc. (ROL) – Bought on 2/22/16 at $27.38. Closing price on 11/18/16 was $32.13. Sell Stop to $28. Dr. Duarte owns shares in ROL.

OPTIONS

Open Straddle – UNH

Buy to open United Healthcare June 2017 140 Call Option (UNH 170616C00140000) up to $16.

Buy to open United Healthcare June 2017 140 Put Option (UNH 170616P00140000) up to $10.

Roll Straddle – GILD

Buy to open Gilead December 2016 $72.50 Call Option (GILD_161216C0007250) up to $5. Bought on 10/31/16 at $4.25. Closing price on 11/15/16 was $4.20.

Buy to open Gilead December 2016 $72.50 Put Option (GILD_161216P0007250) up to $4. Bought on 10/31/16 at $2.85. Closing price on 11/15/16 was $0.95.

Initial Straddle Value: $7.10.  Rollover value $5.15.

Buy to open Gilead February 17, 2017 (3^rd week) $77.50 Call (GILD_170217C0007750) up to $6. Bought on 11/15/16 at $1.65. Closing price on 11/18/16 was $2.70.

Buy to open Gilead February 17, 2017 (3^rd week) $77.50 Put (GILD_170217P0007750) up to $5.  Bought on 11/15/16 at $5.15. Closing price on 11/18/16 was $5.77.

Close Straddle – SPY

SOLD SPY December 16, 2016 210 Call Option at $9.29 on 11/18/16. Bought on 10/31/16 at $6.31.

SOLD SPY December 16, 2016 210 Put Option on 11/18/16 at 0.89. Bought on 0/31/16 at $3.79. – 11/4/16 closing price $1.85.