Posted on January 17, 2022
Today’s trade is a takedown of a 200 year-old Texas healthcare operation called McKesson Corp. (NYSE:MCK), middleman delivery boys for everything pharma related.
As you’ll see, the trade has been crafted for a massive take on a small move – with nothing laid out to set it up.
But before we sell you on the MCK SELL, we have FIVE whopper trades to close – and a whack of cash to pocket.
So let’s git!
We start with our AQUA trade, whose details can be found HERE.
Bottom line is we’ve got a $2.00 debit and are holding the February 18th 45 synthetic short
With AQUA at $38.62, we say it’s time to close.
Buy back the short CALL for $1.75 and sell the PUT for $5.90.
That puts $1.80 NET in your pocket on an initial outlay of just $0.35.
And that’s a ginormous 514%!
Our VRSK trade details can be found HERE.
In sum, we’ve got a $5.80 credit and are holding the March 18th 210 synthetic short.
And great news!
With the stock at $198.15, the synthetic short can be closed for Humphrey Bogart seizure profits.
Buy back the 210 CALL for $4.10 and sell the 210 PUT for $13.60, and you skip out with $15.70 NET on $1.60 expended.
And that’s a fair and square 981%.
On January 5th we sent you Gas Will Rise… Until it Stops, our LIN trade that urged the sale of the LIN February 18th 340/350 CALL spread for $4.10 and purchase of the LIN February 18th 340/330 PUT spread for $3.90. Total credit on the affair was $0.20.
And whaddaya know, today the CALL spread can be repurchased for $3.50 (4.60/1.10), while the PUT spread will fetch you $5.10 (14.80/9.70).
Get that done and you step away with a very fine $1.80 on zilch laid out.
Adjusted for basic commissions gives you a handy 1100%.
Our XYL initiative was sent out December 13th in Dead in the Water: Xylem Swims with the Fishes. There, we recommended you sell the XYL January 21st 120/125 CALL spread for $1.00 and buy the XYL January 21st 120/115 PUT spread for $2.15. Total debit was $1.15.
With expiry at week’s end and the possibility of a bounce before then, we’re shutting her down.
Buy back the short 120 CALL for $0.15, sell the long 120 PUT for $7.70 and buy back the short 115 PUT for $4.20.
Execute, and you jump with $2.20 NET on $1.15 spent.
And that’s a fat 191%.
Our ADP trade’s details can be accessed HERE.
In brief, we’re holding the ADP May 20th 230 synthetic short and a credit of $3.35.
And because we’ve a hunch the stock may skitter and scamper at this level for a short bit, we’re exiting the trade today.
Buy back the short 230 CALL for $13.10 and sell the 230 PUT for $13.80 and you close with
$4.05 NET on an original outlay of $6.95.
That’s 58% on the plus side.
Or four hundred and five bucks.
Whichever you prefer.
As mentioned, we’re chasing MCK lower today for very little cash up front, and the possibility of a wooly mammoth takeaway.
MCK is a little sickly on the fundamental front.
To wit –
They sold off 65.36% of their shares (worth $30 million) over the last six months, of which $24 million was dumped in just the last 60 days.
Now to the chart –
Technically, we have –
Our trade, however, is not predicated upon such a steep decline.
On the contrary, a far more modest pullback will bring us the riches we seek.
Have a look –
A Jew and His Money recommends you consider selling the MCK May 20th 250/260 CALL spread* for a credit of $4.40 (20.30/15.90) and buying the MCK May 20th 250/240 PUT spread** for $4.60 (14.70/10.10). Total credit on the trade is $0.20.
Rationale: we’re looking at an opening credit to win a max $10.20 on the trade.
And it’s always nice pocket something at the outset, no?
Anywho, max loss is $9.80 (difference between the CALL strikes less the initial credit).
Breakeven on the trade arrives at $250.20, just 2.4% below current price levels.
Full payout is ours on a 6.4% decline.
And we’ve got four months to accomplish that.
With kind regards,
Hugh L. O’Haynew