MAY OPTIONS EXPIRY Brings a Bout of Tinkering (LLY, IRDM, WYNN, BRBR, COTY, ELF, AEO, HSY, BLDR)

We start with our LLY trade of April 19th.  The letter was called Harmaceutical Giant Lilly Takes a Dip, and it urged you to sell the LLY May 19^th 380/390 CALL spread for $2.20 nd buy the LLY May 19^th 350/340 PUT spread for $2.85.  Total debit was $0.65.

And…?

Our short CALL is now in-the-money and has to be dealt with.

So…

Because we’ll end up in a debit position of exactly $10.65 at the close, we’re moving as follows—

We’re setting the LLY September 15^th 430 synthetic short* for a credit of $13.50 (32.75/19.25).

That will flip our debit to a credit of $2.85 and give us four more months to fight.

[*Sell the CALL and buy the PUT.]

N-E-X-T!

Next up is our IRDM initiative.  The missive was entitled The Holy One of Israel Levels Mountains…, and there we recommended you sell the IRDM May 19^th 60/65 CALL spread for $1.85 and buy the IRDM May 19^th 60/55 PUT spread for $1.70.  Total credit was $0.15.

And now…?

With the stock closing last night at $59.35, our long PUT is in-the-money, but whether it remains as such is anyone’s guess.

As we write, S&P futures are essentially flat, so you’ll have a choice when the open hits to either:

1. close both the long PUT and short CALL for a slight profit, or
2. let it ride in the expectation of further weakness and greater profits.

For our part, we’re holding to the close.

On March 30^th our WYNN trade landed in your inbox, in a communique called WYNN—Lose.  The idea was to sell the WYNN May 19^th 110/115 CALL spread for $2.10 and buy three WYNN May 19^th 100/97.50 PUT spreads for $0.70 each.  Net Zero Premium was the result.

Last eve, WYNN closed at $110.30, making it another borderline case, as the short CALL is now $0.30 ITM.

Here, too, we leave it to you to either:

1. buy back the short CALL at the open for somewhere in the vicinity of $0.30, or
2. leave it in the expectation of a decline, with the trade expiring a wash.

And may G-d be with you!

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Pseudo-Health Only Lasts Until the Doorbell Rings contained our BRBR trade from March 6^th, which detailed the sale of a BRBR May 19^th 30/32.50 CALL spread for $0.90 and purchase of a BRBR May 19^th 30/27.50 PUT spread for $1.00.  Total debit was $0.10.

It appears our short CALL will end up in-the-money at the close, leaving us with a debit of exactly $2.60.

We’re therefore forced to move.

ACTION: sell two (2) November 17^th 35 CALLs for $3.90 each.  That will flip our debit to a credit of $5.20 and give us a half year to rake in a good haul.

MOVING RIGHT ALONG…

February 13^th was the occasion of our COTY trade that came in a dispatch called Coty Slaps Lipstick on a Porcine Profit.  The recommendation was to sell the COTY May 19^th 10/11 CALL spread for $0.48 and buy the COTY May 19^th 11/10 PUT spread for $0.53.  Total debit was $0.05.

This one is too close to call.  With $11.00 being the upper pivot and price closing last night at $11.33, it could be we’ll be on the hook for a dollar.

So we’re acting thus—

We’re leaving the trade open through the close in the expectation that we’ll be on the hook for the full $1.05.

At the same time, we’re remedying the loss by setting the COTY November 17^th 10 synthetic short* for a credit of $1.46 (2.11/0.65).

That will flip the debit to a credit of $0.41.

COTY will slide to $10, at least, and we should see a nice gain in the end.

[*Sell the CALL and buy the PUT.]

Next up was our November 17^th directive that went by Peeling Off the Mask…  We urged you there to sell the ELF May 19^th 55/60 CALL spread for $1.40 and buy the ELF May 19^th 50/45 PUT spread for $1.95.  Total debit on the day was $0.55.

This morning our short CALL spread is in-the-money, so we’re on the hook for the full $5.00.

And that has to be fixed.

So, we’re setting the ELF November 17^th 85 synthetic short for a credit of $6.70 (15.70/9.00).

That will give us another six months to profit from the coming downside AND flip our debit to a credit of $1.15.

[*Sell the CALL and buy the PUT.]

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Our AEO covered CALL trade’s details are available HERE.

In short, we’re holding one lot of stock with a breakeven of $14.29 and a short 15 CALL that expires tonight.

With AEO closing last night at $13.39, and the short CALL almost certainly expiring OTM, we’re going to be selling YET another CALL to push our breakeven ever lower.

We recommend you sell the AEO November 17^th 14 CALL for $1.49.

That will reduce the B/E to $12.80 and offer us another half year to rake in a profits.

GIDDYUP!

The particulars of our HSY trade can be found HERE.

In brief, we’re in possession of two May 19th 190 CALLs and a $6.22 credit.

ACTION NEEDED: at the close, or on any mid-session weakness, buy back the short CALLs and sell two more HSY November 17^th 190 CALLs for $79 each.  That will add another $2.00 to our credit, bringing it to $8.22 and offering us another six months of life.

Finally, our BLDR trade, whose details are available HERE, sees us holding two short 55 CALLs expiring tonight and a credit of $11.99.

ACTION: buy back the short CALLs at the close (or during a bout of intraday weakness) and sell two BLDR November 17^th 55 CALLs in their place for $68.20 each.  That will add $2.00 to our credit, bringing it to a total of $13.99

And with that, we bid you Shabbat Shalom from the windy hilltops of the Land of Israel.

G-d bless all you good Jews and Noahides.

Eschatologically yours,

Alan B. Harvard

Follow @HughLOHaynew