Posted on December 10, 2020
We’ve got another stock on the brink of a mighty tumble today, but before we get there, we’ve a couple that require your attention.
The first is our BJ initiative, the details of which can be found here.
In short, we have an open synthetic short at 45 (long PUT/short CALL) expiring next Friday, December 18th, an open STOP buy order at $45.01 and a debit on the trade of $5.80.
And we’re urging you to shut her down.
The long PUT goes for $7.00 even, and we say take it.
The short 45 CALL will cost you a nickel to repurchase. Do it, and toss the protective STOP buy order.
Total win is $1.15 on $5.80 spent. That’s 20%. And it’s just fine.
Our USO/XLE pairing was set back on April 27th in a letter called Shooting Oil in a Barrel, where we took advantage of a once-in-a-lifetime pricing anomaly to get in big on the NYMEX-based crude ETF, USO.
It was a short XLE CALL spread set against a long USO CALL that we subsequently turned into an all out bullish bet when we repurchased the short CALL here.
We’re sitting on the long XLE January 15th 45 CALL and the long USO December 16th (2022) 3 CALL, which today carry values of $0.34 and $1.16, respectively.
And we say, sell ‘em.
Your final take on the trade is $1.50 on $0.32 spent.
And that, too, is the work of the Almighty.
And now for this week’s initiative.
We’re trading BMC Stock Holdings (NASDAQ:BMCH) today, retailers of wood and wood products for the building trades.
The stock has a reasonable fundamental profile (P/E is 23.90, P/B is 2.81, Dividend Yield is zippo), but technically it looks very weak.
Breakeven for the trade comes at $45.15.
With the stock now at $46.39, that would entail a decline of 2.6% over the next five weeks.
Many happy returns and a freiliche Chanuka to all our wonderful readers!