7july
on todays after market Options Action hit, Mike noted unusual options activity with APA . i dont follow the stock but looked at it after the clip. He noted a large order of the Aug 40/50 call ratio for .84cents , specifically trader bought 3000 Aug 40 calls and sold 6000 Aug 50 calls. Here is the video clip
i do ratio spreads on top of an existing long stock (100shares at least) so it is also called a catch up trade, i dont have (nor want) the ability to sell naked calls. Mike said he didnt think it was based on stock but never know. This trader wants the stock to return to 50 at Aug opex with max profit being at 50 but the profit range being between 40-50 (minus the .84 debit to enter trade) , "losses" happen above 50
an alternative trade with defined risk is a sell Put spread to buy call spread trade.. there probably is a cool name for it , just dont know it.. here it is using same Aug opex
Sell the Aug 30/25 put spread and use that premium to help pay for the Aug 35/42.50 call spread... mid point right now is about $1.20 debit
The street seems to be leaning that the recent energy selloff was overdone so possibly a near term bottom on friday with oil. The trade on Options Action is very aggressive for the strikes selected, needing $7 more upside just to get in the money at opex and a return to near its 52week high to get the max profit. With my alternative im using strikes that are easier to hit IMO, taking the easier first part of that move if it happens. the profit zone is the box on the chart below. the credit put spread im selling uses the 30 level which is the assumed near term low and has some support dating back to pre Russia invasion. max profit on my trade is at $42.50 or higher at opex. plan on holding to opex to see all that since you are working 2 trades at same time best case.. the decaying credit put spread is still holding value till opex as the call spread is gaining.
I will see how stock opens tomorrow and might follow, maybe have to tweek that strikes a bit
