U.S. retailers posted the weakest sales in August in six months and only an increase in purchases at gas stations prevented an outright decline, but the soft patch in spending is unlikely to last. Retail sales rose a scant 0.1% in August, the government said Friday. Economists polled by Market Watch had forecast a 0.3% increase. The numbers would have been even worse if not for a 1.7% spike in spending at gas stations. Retail sales omitting car fuel fell 0.1%. One saving grace in an otherwise drab report was a sunnier look at what consumers spent in July. Retail sales were raised to show a 0.7% increase instead of 0.5%.

*Source:  Market Watch

Let’s consider Take Two Interactive Software (Ticker: TTWO):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out four significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on September 12th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN on September 11th.  This indicator measures strength and weakness for a 48-hour period, in this case, strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  Add to that all three predictive differences are above the zero line and positively sloped.  I want to play the VP continued bullish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For TTWO, that yields a targeted strike of ~$146.00.  You may want to consider the TTWO October 12th weekly expiration 144/146 call spread, buying it for $0.40.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.40 and max reward = $1.60.

This means that you are getting odds of 4.00:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

If you would like to learn more about the VantagePoint platform and take advantage of the exclusive offer that our clients enjoy, please visit:

https://discover.vantagepointsoftware.com/prosper-demo/

Mike Shorr
Mike Shorr
Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProperTradingAcademy.