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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster Issue: October 11, 2022

A very promising start to the trading week, which saw the indexes surge higher by 5%, was somewhat washed away by last Friday’s post Jobs Report sell-off. And while the steep declines Friday were worrisome, big picture the S&P 500 still managed to gain 1.5% on the week, the Dow rallied 2%, and the Nasdaq added 0.7%.

Cabot Profit Booster Issue: October 11, 2022

Market Overview
A very promising start to the trading week, which saw the indexes surge higher by 5%, was somewhat washed away by last Friday’s post Jobs Report sell-off. And while the steep declines Friday were worrisome, big picture the S&P 500 still managed to gain 1.5% on the week, the Dow rallied 2%, and the Nasdaq added 0.7%.

This week we are adding a biotech play, though we are doing so ultra-defensively given market conditions.

The Stock – Sarepta Therapeutics (SRPT)
Why the Strength
Sarepta is an RNA-focused biotech firm seeking treatment for rare diseases caused by a single genetic mutation. Its primary focus is for Duchenne muscular dystrophy (DMD), a fatal neuromuscular disease that occurs in one in every 3,500 to 5,000 boys. It’s usually diagnosed around the age of four, with muscle deterioration that sadly forces patients into a wheelchair by 12 and limits lifespans to 35 to 40 years.

Right now, the company has three injectable treatments that improve conditions for about 30% of DMD patients—but two weeks ago, it submitted a new biologics license application (BLA) for a treatment that potentially could address 80% of DMD patients. The drug, SRP-9001, would be the first gene therapy for Duchenne and has the potential to be about a $4 billion market. The treatment would be for those in early stages of Duchenne, 4 to 7 years old, for whom clinical studies have shown effectiveness in improving ambulatory ability out four years.

Management has asked for an accelerated BLA approval and are confident enough in getting the green light they are gearing up production for SRP-9001, which has a two-year shelf life, and are planning 50 sites to treat the bulk of DMD patients. Approval, which is expected in mid-2023, clearly will drive the business in the near term.

Long-term, Sarepta has some three dozen other treatments in development for Duchenne, as well as clinical trials to treat limb girdle muscular dystrophies (LMGD) and early-stage efforts aimed at multiple sclerosis and about a dozen other similar afflictions. While the bottom line is in the red, Sarepta’s revenues are expected to be up 31% from a year ago, with another 30%-ish gain in 2023—and bigger potential down the road.

Technical Analysis
SRPT crashed in early 2021 and was basically a nothing burger for the next year and a half, with multiple dips to 60 before the buyers finally showed up. The stock got going this June, with positive clinical results in July resulting in eight weeks up in a row and an eventual push to 120. And SRPT has basically held onto those gains in recent weeks, which is obviously impressive in this bear market. Stop – 90

SRPT

The Covered Call Trade
Buy Sarepta Therapeutics (SRPT) Stock at 109, Sell to Open November 100 Strike Calls (exp. 11/18) for $12, or a Net Price of 97 or less

Static Return: $300 per covered call (3.09%)

Breakeven: 97

Covered Call Return (if assigned): $300 per covered call (3.09%)

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 97 or less. (In this case 109 minus 12 = 97. Or another example is you could pay 108.5 for the stock and sell the call for 11.5, which also equals 97)

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
Cameco (CCJ)28.9026.0024.5October 26 -- $4.30$1.00
Academy Sports & Outdoors (ASO)48.0044.0043October 50 -- $2.13$0.20
Las Vegas Sands (LVS)40.7537.0033.5October 40 -- $2.87$0.50
OnSemi (ON)64.5060.0055October 65 -- $3.77$1.00
Devon Energy (DVN)71.0069.0062November 65 -- $2.45$7.00
Wingstop (WING)130.00129.00110November 130 -- $11.85$12.00

The next Cabot Profit Booster issue will be published on October 18, 2022.

Analyst Bio

Jacob Mintz

Jacob Mintz is a professional options trader and editor of Cabot Options Trader. Using his proprietary options scans, Jacob creates and manages positions in equities based on unusual option activity and risk/reward.

Jacob developed his proprietary system during his years as an options market maker on the floor of the Chicago Board of Options Exchange, where he ran several trading crowds for nearly 10 years.

After a successful career on the trading floor Jacob was tasked with setting up a trading desk at a top-tier options trading company, trading against the most sophisticated hedge funds and institutions in the world.

Today Jacob trades for himself, coaches and teaches about options trading, and runs our Cabot Options Trader, Cabot Options Trader Pro and Cabot Profit Booster advisories. Jacob lives in North Carolina with his wife and two kids who keep him very busy with their sports and social calendars.