United Health trade suggestion

 

6 Aug 

on the 5Aug Options Action show, a viewer question was responded to about United Health.. here is the video clip

United Health video clip

Both Carter and Tony agree that viewer should add to the position but dont offer an actual options trade to go with the show. they mention a high from april, the stock is about $15 off that high. here is my suggestion with the assumption you have at least 100 shares and expect it to move higher:

Buy the OCT 550 / 570 1x2 Ratio Spread. for near $300 credit.. buy one 550 and sell two 570s 

The profit range for just the ratio spread is 550-590 at opex in Oct . but also the stock is increasing at same time so you are getting 2x from 550-570 .. the ratio technically doesnt start losing money until above 590 but your stock is gaining same time.. Good way to juice your returns if you are just a buy and hold investor like this caller. Plus you are entering for a credit so if stock is under 550 at opex, no harm no foul. Can do same trade if you have a Leap instead of 100 shares.. say the Jan2024 500 call for about $9900 vs $53500 for 100 shares.

APA alternative trade

 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

Options Action APA Trade

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

Tesla short Put exit

 14 Jun

in the interest of full disclosure unlike most gurus on twitter that only post their winners. made a tactical decision today about the short puts ive been defending on TESLA at strikes near 1000 from earlier in the year. I am at risk of marking the bottom with my actions. as i review my twitter stream both on tesla specific commentary and general market, there are many that i follow that i respect still seeing further downside for general market in raw SPY points and/or a VIX blowoff. many continue to say that they still have not seen that panic/desperation point the will mark the bottom / and or a VIX above 40. will that happen i cant say..

as far as tesla, multiple technical analysis guys are targeting sub 600 and low 500s. i broke out the calculator so see if can withstand a drop to 500 with my short puts and came to the conclusion that i likely will get maintenance calls and be put in the situation of closing the puts, depositing more funds, or selling off other positions to meet any maintenance calls.

Since entering the short puts months ago i have sold numerous call credit spreads against (ie at higher strikes than the short puts) and have rolled week to week or to next month for credits, and have bought debit put spreads on the way down as hedges. so the actual "loss" is about half but the paper loss is a nice kick in the balls. i still have credit spreads working now and long Leaps and short some near dated calls but the defense of the short puts is consuming more and more of the buying power available. also that buying power set aside for the short puts is not really making me more than chump change now since the strikes are way higher, so rolling even from month to month is only a few hundred bucks. 

So point being, i closed out some short puts today leaving only a couple that are cash secured. now if stock returns to near 1000 without that next leg down i will be an idiot but right now in the near term its protect the account. the account value is unchanged after closing the puts, just have less cash now

on the subject of cash secured, ive been doing some math in my head and coming to the conclusion that since the short puts are 900+ strikes that it might be better to be "put the stock" come opex time.. looking at it like this. currently expires July monthly, last i looked, rolling out to August monthly same strike only nets me about $400.. thats for an entire month.. vs just being Put the stock (yes for that $900+ stock price), but with owning the shares im able to sell covered calls nearer dated, say every 2 weeks out for premium far in excess of that $400 monthly(such as the 800calls). will have to revisit this right before opex and bounce some numbers around.