Posted on August 18, 2023
Greetings from the Royal Palace in Monaco, where we’re presently dining on cumin sprigs and fresh corn, fried in salmon oil.
Let’s Get Started…
We open with our CPRT trade, that arrived in your inbox on May 29th in a missive called CPRT Ready to Skid Lower.
There, we urged you to sell the CPRT August 18th 90/95 CALL spread for $1.75 and buy the CPRT August 18th 85/75 PUT spread for $1.85. Total debit was $0.10.
Today, CPRT opens trading at $85.99. And with more downward momentum expected at the open, we say leave her be. We either lose our initial dime, or we make something much bigger.
XPO is up next; the trade that was featured May 24th in XPO Runs Out of Gas.
The bet was to sell the XPO August 18th 47.50/52.50 CALL spread for $1.65 and buy the XPO August 18th 45/40 PUT spread for $1.65. Zero Premium was the result.
We’re going to be on the hook for the full value of the CALL spread at the close, so we’ve got to act.
We’re setting the XPO November 17th 67.50 synthetic short* for a credit of $2.70 (7.70/5.00).
That’ll reduce our debit to $2.30 and give us 90 days to capitalize on XPO weakness.
Finally, we arrive at our CXM trade, whose details can be found HERE.
In brief, we’ve got a credit of $0.21 and we’re holding the 7.50 synthetic short that expires tonight.
All things being equal, it appears we’ll be in the red at the close unless we move.
So we are.
Buy back the short CALL for $6.45 and reset the February 16th 7.50 synthetic short* for a credit of $6.25 (6.50/0.25).
That gives us a credit of a penny and half a year to profit from CXM weakness.
Alan B. Harvard