Posted on July 12, 2020
We’ve got one trade that requires attention before we move on to this week’s business.
It’s our IGV/TQQQ straddle pairing that we initiated in Market Neutral in High Gear on July 6th.
The recommendation was to sell the IGV August 21st 290 straddle for $23.60 and buy the TQQQ August 21st 103 straddle for $23.20. Total credit was $0.40.
The long TQQQ sells for $20.30 and the short IGV runs for $18.30. Sell the former and buy back the latter for a fat $2.00 in your pocket (to add to the initial $0.40), and wait to see if there’s something to be had on the PUT side when this bugger eventually breaks.
We’re moving today from the ludicrous to the bizarre with a look at a stock that has no business being listed on any self-respecting exchange.
The company is Workhorse Group Inc. (NASDAQ:WKHS), an outfit with no earnings, no dividend and no book value, whose shares increased in price by 1650% in the last three months.
Do they provide an online meeting space for students and businesses, you ask?
Or an easy to scale, cloud-based buy and sell platform?
Or maybe a fully-textured, virtual paramour experience – complete with latex glove-cups and mock leather stirrups?
According to their literature, Workhorse designs, manufactures, builds, sells, and leases battery-electric vehicles and aircraft.
And we all know the demand for those items is infinite.
In truth, the stock surge occurred because WKHS is in the running for a multi-billion dollar contract with the US Postal Service.
Even though they’ve never sold anything yet.
But they might.
Here’s the chart –
Technically, the issues are plain –
Bottom line is we’re no equine equivocators.
Nor will we brook such roan baloney.
We’re gonna ride it like this –
A Jew and His Money recommends you sell the WKHS October 16th 27 CALL for $2.20 and use the funds to purchase the WKHS October 16th 9 PUT for $2.15. Total credit on the trade is $0.05.
Rationale: The above sets us up for a healthy haul in the event of a decline, and the trade pays for itself – a nice kicker.
We’re not worried about the naked CALL, as it’s unlikely in the extreme we’ll see WKHS spiking toward it’s former highs at $23.
That said, we would urge all and each to place a STOP buy order for the stock at $26 – just in case WKHS experiences another “Secretariat” moment.
With kind regards,
Hugh L. O’Haynew