This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

LNC: Lincoln National Calls!

One thing that I believe is certain when it comes to trading stocks is that stocks go down much quicker than they go up! This is not true for all stocks -- just 99% of them! Accepting this potential as fact will help you to further understand why options volatility rises on down moves and falls on up moves.

Why this "going down faster than going up" thing is almost a certainty is due to various reasons such as: 1) selling any stock can be caused by many reasons while only one reason causes someone to buy a stock; 2) fear is a better motivator for stock price movement than is greed; and 3) mathematically it takes a greater percentage move to have a stock go up than to go down!

For proof of #3, consider a stock that is trading at $10 that drops to $8, falling two points, just declined by 20%. That same move from $8 up to $10, that two-point move, is a 25% move. Thus, both moves were the same two-point move, but the one going down moved 20% and the one going up moved 25%.

So many stocks have been battered over the summer months of this year that to even move back to their price levels of this past winter and/or spring is asking plenty! With the tide of the math moving against these battered stocks, each one will be studied fundamentally far more so than technically as they try to make up so much lost ground! Thus, if a stock cannot pass the fundamental test, you are wise to avoid being mentally if not financially trapped by its technical pattern.

Let's review the T3/OP video with Scott and Jill as they give a quick run down of trends in the insurance space and LNC in particular.

Fundamentally, I like Lincoln National (LNC - Get Report). LNC has been selling insurance since 1904. This year's earnings performance should come in with a 25% or more gain over that of a good 2010 performance! Management has been and is excellent or these percentage gains would not have been achieved during these rather difficult financial times. Yet, LNC has seen its stock price tumble from almost $30 in early summer, almost straight down to $14, where recently it has begun to gather upside momentum. At $20, LNC still trades under a 6 P/E multiple, growing its earnings this year at better than 4X that number!

Consider a bullish vertical call spread in LNC, expiring in January. This is a medium risk spread because it is biased to the bullish side, while medium in reward because it is a hedged spread which caps the reward potential.

Trades: Buy to open 3 LNC January 20 calls for $2.20 points and sell to open 3 LNC January 25 calls at $0.50.

The total risk for the spread is the premium paid for it, or $1.70. As always, I will monitor the trade on this site in the comments section below.

OptionsProfits can be followed on Twitter at

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
MET $45.84 1.64%
LNC $44.13 1.56%
PRU $78.67 1.33%
SFG $114.97 -0.01%
AAPL $93.64 -0.11%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports