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TRADE BULLETIN – January Expiry Demands Your Full Attention (CELH, BMCH/BLDR, CPRT, KTB, EXPE, IAA, GLD, APPS, W, UNG, SBGL/SBSW)

Posted on January 15, 2021

Lots of trades to tend on this January options expiry Friday, so grab a Lagavulin and sing along.

We start with our bet on CELH, launched December 24th in a letter called Drink Poison. Lose Weight. Die Young.  There, we urged you to sell the CELH January 15th 45 PUT FOR $5.50, and buy the CELH February 16th 45 PUT for $8.00.  Total debit was $2.50.

And now?

The January PUT will expire worthless this eve, leaving us set up nicely for a profit on the long February 45.

Wait for it.

NEXT!

We opened a BMCH initiative on December 10th that asked you to sell the BMCH January 15th 45 CALL for $2.75 and buy the BMCH January 15th 45 PUT for $2.60.  Total credit on the transaction was $0.15.

BMCH was soon after bought out by BLDR, and our options were relabeled BLDR1.

And the CALL is now in-the-money by roughly $7.50.

So, we’re selling the BLDR May 21st 32 synthetic short for $7.95 (9.70/1.75**) to offset and to leave the downside open to further profits.  That will bring our net credit up to roughly $0.60.

Buy back your open BLDR1 45 CALL directly before the close.  With S&P futures pointing lower a few hours before the open, you may make off very well with this one.

We’ll report back on Monday with an exact tally on the trade.

[**Sell the 32 CALL for 9.70 and buy the 32 PUT for 1.75.]

Set a STOP buy on the shares at BLDR $44 to save from a runaway loss.  And remember, if the STOP is tripped, it has to be replaced with a STOP sell at the same $44 to keep the trade square.  If that’s tripped, reset the STOP buy at $44.

Ad infinitum…

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Next up was our CPRT trade from Is Your Car Falling Apart? on November 30th.  The recommendation was to buy the January 15th CPRT synthetic 105 PUT for a $10.00 credit, then buy a protective January 15th 120 CALL for $2.80.  Total credit was $7.20.

Today, we’re looking at CPRT at $117.26 with more downside to come.

The short 105 CALL, however, presents a problem.  And we’re recommending you fix it as follows –

Directly before the close, buy it back for roughly $12.50 and sell the March 19th CPRT 110 CALL for $10.10.  That will reduce our initial credit to $4.80.

Final numbers on Monday.

Yep!  Moving on to our KTB initiative from Give Thanks For Jean Shorts, you’ll recall that we advised you sell the KTB January 15th 40/45 CALL spread for $2.15 and buy the KTB January 45/35 PUT spread for $3.95.  Total debit was $1.80.

Both the 40 CALL and 45 PUT are in-the-money, but with breakeven on the trade not arriving until $40.70, we’re buying back the CALL spread for $5.45 and selling the March 40 synthetic short for $4.05 (6.60/2.55**).

That ups our debit to $3.20, but leaves us open to profits on the downside.

Set a STOP buy on the trade at $48, and follow instructions offered above for the BMCH/BLDR trade.

New breakeven on the affair is $36.80.

[**Sell the 40 CALL for 6.60 and buy the 40 PUT for 2.55 – all numbers last night’s closing prices]

Our Expedia trade, the details of which can be found here, is now sitting with a credit of $0.14 going into tonight’s expiry, and short the 110/125 CALL spread.

The spread will expire in-the-money at the close, leaving us with a net debit of $14.86, so we’re moving as follows –

We’re selling the EXPE March 19th 130 synthetic short for $13.30 (20.00/6.70**).

That will flip our initial credit to a debit of $1.56 and give us excellent exposure to the downside.

Set a STOP buy on the trade at $150, and follow instructions offered above for BMCH/BLDR.

Our new breakeven on the initiative will be $128.44.

[**Sell the 130 CALL for 20.00 and buy the 130 PUT for 6.70 – all numbers last night’s closing prices]

Trade details on our IAA initiative are available here.  In short, they describe our current credit of $1.35 and open, short 60/65 CALL spread that expires this eve.

With price now at $61.00, we’re recommending you close immediately (or on further weakness) for a debit of $1.45.  That will lead to a loss on the trade of $0.10.

NEEEEXT!

Our GLD short is still open and within reach of profitability.

Our breakeven on the trade is $169.03 and we’re holding this evening’s 186 CALL for protection.

It will almost certainly expire worthless, which means we’ll be looking to replace it with the February 5th 183.50 CALL for $0.48.

New breakeven on the trade is $168.55.

Our APPS trade needs some therapy.  All her details are located here.

In short, we’re holding a short 30/35 CALL spread with a credit of $0.95, and the spread is full in-the-money.

So we’re acting as follows –

With an anticipated net debit accruing upon expiry of $4.05, we’re selling the April 16th 55 synthetic short for $4.70 (12.70/8.00**).

That will put us $0.65 in the credit column with full exposure to APPS’ downside.

Set a STOP buy on the trade at $65, and follow instructions offered above for the BMCH/BLDR trade.

Breakeven arrives at $54.35

[**Sell the 55 CALL for 12.70 and buy the 55 PUT for 8.00 – all numbers last night’s closing prices]

Our W trade was launched way back in May in a letter called “W” is For WHY ON EARTH…?, wherein we urged the purchase of the January 15th 185 PUT for $49.60 and sale of both the January 15th 165 PUT for $35.60 and the January 15th 105 PUT for $13.50.  Total debit on the trade was $0.50.

As we head into expiration, the whole project is way out-of-the-money.

And that’s where it will end.

Chalk it up as a loss of $0.50.

Rolling, rolling, rolling…

We issued a UNG/SBGL (now SBSW) pairs trade exactly a year ago that saw you purchase the UNG January 15th 2021 20 CALL for $1.55 and sell the SBSW January 15th 2021 12.50 CALL for $1.65.  Total credit was $0.10.

And now?

The UNG option will expire out-of-the-money tonight, but the short SBSW is now ITM.

Which means we have to act.  Thus –

Wait until the close (or on weakness) to buy back the SBSW 12.50 CALL for roughly $4.00, and simultaneously sell the April 16th 12.50 synthetic short for $3.85 (4.50/0.65**).

That will put us at roughly breakeven for the trade with the possibility of profiting on the downside.

Set a STOP buy on the trade at $17.75, and follow instructions offered above for the BMCH/BLDR trade.

[**Sell the 12.50 CALL for 4.50 and buy the 12.50 PUT for 0.65 – all numbers last night’s closing prices]

And finally, last April 17th we rolled a single short UNG 22 PUT to tonight’s expiry.  The trade has a total net credit of $0.29, and the option will expire OTM at the close.

We’re therefore urging you to buy it back for $12.40, and sell the UNG January 21st (2022) 23 PUT for $13.35.

Your new credit is $1.24.

The G-d of Israel is Erech Apayim, brothers and sisters, and He wants us to follow His lead.

It won’t be long…

Eschatologically yours,

Alan B. Harvard

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