Posted on June 17, 2022
Good morning, race fans!
We’ve got a small cohort of expiries today that require attention and one more that needs a tweak, so without further ado, let’s get attem.
First up is our June 2nd TPOR/DUSL initiative that we botched from the get-go, by saying it was a sure-fire winner, when it was anything but.
That notwithstanding, several wrote that after clarifying, they were still going with the trade.
And so we publish the following advice for those still ‘in’.
Recall: the trade urged the sale of one lot of DUSL for $31.35 and the purchase of a DUSL December 16th 39 protective CALL for $4.10. Additionally, we recommended setting the TPOR December 16th 32 synthetic short for a debit of $4.20, and rounded out the trade with the purchase of a TPOR December 16th 39 protective CALL for $5.20. Total credit on the affair was $17.85.
We’re closing part of the trade and leaving the rest be. It’s complex – because there are a number of moving parts – so pay attention.
Like this –
That puts you in the black exactly $5.27 (17.85 + 11.00 – 23.58).
But it also leaves a few open options.
To wit –
Both of these options are worth little at the moment, but in the event of a bounce, we’ll cash in nicely from them. So, hang on and look long.
At the same time, we’re also holding an open, short TPOR 32 CALL – the other half of the 32 synthetic short (the PUT of which we’re now closing).
And regarding this, our advice is as follows – TPOR is now trading at $22.20 and needs a 45 percent rise to put the option in play.
And that’s very possible – especially with a 3x leverage ETF like TPOR.
But it won’t happen in the coming days.
If it ever does.
So leave it be, and set a STOP buy on the shares at $33 to keep losses to a minimum.
Remember, too, that if the STOP is triggered, a new STOP sell on the shares should be set at $33 to keep the trade square. Should that STOP be filled, you’ll need to reset the STOP buy at the same $33.
An open STOP order should be in play until the trade is closed.
And that could be very shortly.
We start with our CTVA initiative from May 4th. The letter was called Those Chemicals Rotting Your Brain, and it urged you to sell the CTVA June 17th 55/60 CALL spread for $1.80 and buy the June 17th 55/50 PUT spread for $1.75. Total credit was $0.05.
CTVA closed last eve at $54.04, with the long 55 PUT selling for $1.00 and the short 55 CALL going for $0.25.
Advice: Sell the former and buy back the latter and you exit the trade with $0.80 NET on nothing expended.
Adjusted for minimal commissions makes for a very fine 433%.
We’re assuming the remaining options will expire worthless.
Update, if necessary, next week.
Here in the Land of Israel, the Holy Sabbath awaits.
Our TLT trade arrived in you inbox on April 18th. The communiqué was called Bond Market Ditches Pharaonic Death Mask and it urged you to buy the TLT June 17th 120/124 CALL spread for $1.97 and sell the TLT June 17th 123/119 PUT spread for $1.85. Total debit was $0.12.
Today, our short PUT spread is in-the-money and requires action.
We’ll be four points in the red at the close and are therefore urging you to set the TLT September 16th 115 synthetic long* for a credit of $3.00 (3.80/6.80).
That will put us in the red by only $1.12 and position us to participate in the long bond’s upside.
Our BMY trade graced your desktop on April 4th in a missive entitled Pharma Bulls Overdose.
The trade recommended you sell the BMY June 17th 72.50/75.00 CALL spread for $1.22 and buy the BMY June 17th 75.00/72.50 PUT spread for $1.21. Total credit on the affair was a penny.
And now we close.
Because this one is borderline and could start swinging over the course of the trading day, we say close it up immediately.
Buy back the CALL spread for a debit of $0.60 (0.63/0.03) and sell the PUT spread for a credit of $1.75 (2.26/0.51).
That fetches you a mean $1.16 NET on nothing laid down.
Adjusted for minimal commissions makes for a take of 673%.
Our XOM bet sees us holding the June 17th 85 synthetic short and a debit of $1.96.
And with XOM last trading at $91.39, it appears we’ll be holding one in-the-money short CALL at day’s end.
Assuming no movement in the shares, we’ll be in the red an additional $6.39 at that time.
In order to ameliorate that exigency, we’re recommending you buy back the CALL at the close and set the XOM August 19th synthetic short for a credit of $8.45 (11.55/3.10).
That flips our debit to a credit (exact numbers after the close) and allows us to participate in XOM’s demise!
Details of our FCN initiative can be sourced HERE.
In essence, we’re holding tonight’s 125 synthetic short and a debit of $3.17.
With the short CALL now in-the-money, we’re forced to buy it back at the close for roughly $38 and reset the December 16th 125 synthetic short for a credit of $39.15 (41.90/2.75).
That will reduce our debit to approximately $2.00 (exact figures after the close) and give us another half year to partake of FCN’s downside.
Alan B. Harvard