Running Down August Options Expiry – While Mexican Cement Bags Us a 77% Profit. (APTV, ORLY, VMI, LKQ, CX, WSO, UPS, XLF, DE)

We open with our APTV initiative, launched on July 19^th in A Trip to Sunny Dublin.

There, we urged you to buy the APTV August 20^th 160/165 CALL spread for $1.15 and the APTV September 17th 145/135 PUT spread for $3.30. Total debit was $4.45.

And now?

With the stock poised to close between the two spreads, we stand to lose our initial debit.

But with all signs still pointing to further declines, we’re acting as follows:

We’re selling the APTV September 17^th 145/150 CALL spread* for a credit of $2.60 (10.30/7.70) and buying three (3) APTV September 17^th 140/135 PUT spreads** for $0.90 (1.85/0.95) each.  Total debit on the fix is ten cents ($0.10).

Added to our initial debit, that puts us out of pocket $4.55 with a chance of securing a $15 payout.

[*Sell the 145 Call and buy the 150 Call.  **Buy the 140s and sell the 135s.]

Next up is our ORLY trade from When the Luck of the Irish Needs a Tune-Up.

That dispatch reached you on July 12^th and recommended you sell the August 20^th 620 PUT for $33.70 and buy the November 19^th 620 PUT for $51.20.  Total debit on the trade was $17.50.

And now?

We still expect ORLY to be trading around 540/550 in the next month, so the open PUT has good meat on it.

That said, today’s expiry will cost you roughly $17.00 for the short PUT, while the long is fetching $37.70.  If you sell the long 620, you’ll exit the trade with roughly $3.20 in hand, a profit of 18%.

If you choose to hold the long 620 – and the downside we expect comes to pass – you could be the proud recipient of a $60.00 or $70.00 payday.

Your choice.

But we’re booking out with our 18%.

Next!

Third on the docket is VMI, whose trade details can be found HERE.

To sum, we’re short one lot of VMI at $226.28 and are holding a long August 230 CALL for protection.  Our overall credit is $206.43.

With VMI now trading at $235.99, however, our long CALL will be triggered and our short closed.  That will put us in a debit position of $23.57.

The downside still looks rich, though, so we’re moving like this –

Like the APTV trade above, we’re selling the VMI September 17^th 230/240 CALL spread for a credit of $4.50 (10.30/5.80) and buying six (6) VMI September 17^th 200 PUTs for $0.75 each.  That will add nothing to our current debit, but will open us up to unlimited profits on the downside.

We opened our bet on LKQ on June 16^th in We Cannibalize the Car Parts People.

That directive urged you to sell the LKQ August 20^th 47.50/50.00 CALL spread for a credit of $0.95 and purchase the LKQ August 20^th 42.50 PUT for the same $0.95.  Net zero premium was the result.

LKQ is trading over $50 as of last night’s close, meaning we’re on the hook for a 2.50 loss if she stays there.

So we’re acting thus –

As above, we’re selling the LKQ September 47.50/52.50 CALL spread for a credit of $1.50 (2.40/0.90) and purchasing three (3) LKQ 47.50 PUTs for $0.55 each.  That will add $0.15 to our (potential) $2.50 loss, bringing it to $2.65 – and open us up to Spock-like unlimited profits.

Final numbers on Monday.

Nice, Big Cement Bag of a Win

Our CX trade expires today with a profit.

It was June 3^rd when Cement Shoes Found on Rio Grande Corpse graced your inbox.

The trade asked you to sell the CX August 20^th 8.00/9.00 CALL spread for a credit of $0.40 and purchase the CX August 20^th 9.00 PUT for $1.15.  Total debit was $0.75.

CX closed last eve at $7.67, offering us a gross take of $1.33.

Less our initial debit, that leaves us with a 77% gain.

You can close the trade at the open (as we’re planning), or leave it in the hope of further downside by day’s end.

We’re booking it as above.

Details of our May 31^st WSO trade appeared in A Cold Day in Hell: Watsco Stock Meets Its Maker.

The trade recommended you sell the WSO August 20^th 240 PUT for $1.55 and buy the WSO November 19^th 240 PUT for $5.60.   Total debit was $4.05.

And now?

With WSO descending marvelously, we couldn’t have hoped for better.

The short 240 PUT will expire OTM this eve (unless something miraculous occurs), and the long November option is ready to receive heaven’s bounty.

Hang tight.

We’ll update as needed moving forward.

Almost There – The Penultimate Report

Our UPS communiqué was entitled UPS About to Dive, and it got to you on March 22^nd.

There, we urged you to set the August 20^th 155 synthetic short for a credit of $0.75.  And to set a STOP buy on the shares at 165.

If you did, your shares will be called away from you at the close of trade today, but you will have a $9.25 debit that requires treatment.

So here it is –

UPS is in the midst of a serious decline, and will likely return to the 175 range to cover a large gap.

To that end, we’re recommending you sell the UPS September 17^th 190/195 CALL spread for a credit of $2.50 (6.40/3.90) and purchase five (5) UPS September 17^th 180/175 PUT spreads for $0.55 (1.26/0.71) each.  You’ll add $0.25 to your existing debit, bringing it to a total of $9.50.

You’ll also open your earnings potential to $25.00 – easily eliminating any existing loss on the trade.

Our XLF trade, whose details can be found HERE, sees us holding a debit of $1.27 and short the XLF 35/37 CALL spread expiring today.

With XLF now trading above $37, it’s likely we’ll be stuck with an additional loss of $2.00 on the trade, for a total of $3.27 on the debit side.

We’re therefore acting like this –

We’re selling the XLF October 15^th 36/39 CALL spread for $1.52 (2.11/0.59) and buying eight (8) XLF October 15^th 35/34 PUT spreads for $0.21 (0.61/0.40) each.

We thereby add $0.16 to our debit, for a total of $3.43, but at the same time, open the opportunity for an $8.00 score.

And Finally…

Details of our DE trade can be found HERE.

The skinny on this one is we’re holding two short August 20^th 320 CALLs and a credit of $7.70.

With DE now below 360 – and barely holding support – we’re recommending you buy back the CALLs at the close (or on any significant intraday weakness), and sell two (2) DE September 24^th 315 CALLs for $45.25 each.  That should add roughly $10.00 to our existing credit, bringing it to $17.70.

Final tallies will be available Monday.

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As we approach the holy day of Judgment, Rosh HaShana, we pray for the souls and livelihood of all our fellow Jews and loyal Noahides.

Shabbat Shalom!

Eschatologically yours,

Alan B. Harvard

Follow @HughLOHaynew