Posted on August 18, 2020
Just one action required today, friends.
And there’s money to be banked.
As Hugh mentioned in yesterday’s missive, our long/short straddle STRADDEGY© is designed to be held until expiration (or very close thereto) before being shut down.
And under normal circumstances, that’s exactly what we’d do.
But because we’re expecting an imminent reversal of fortune for the market as a whole, we feel it would be a significant ‘miss’ if we didn’t take profits on the high side of some of our trades – as Hugh did yesterday on our GLD/WPM pairing.
As we mentioned at the time, if trends continue in force, we’ll simply be out bigger profits. But if not, at least we won’t be leaving anything on the table. Better prudent than greedy, we wrote at the time, and we still think it’s the best approach.
Today, we’re closing down the CALL side of our JNJ/SPXL pairing for the exact same reason. We see another opportunity to stuff our pockets before the tide shifts.
The original trade arrived on July 20th in a dispatch called The Two-Way Straddle Battle. There we urged you to sell the JNJ October 16th 150 straddle for $12.80 (CALL – $5.60; PUT – $7.20) and buy the SPXL October 16th 47 straddle for $12.75 (CALL – $6.30; PUT – $6.45). Total credit on the trade was a nickel.
The JNJ CALL is worth $4.20 and the SPXL CALL goes for $9.80. Buy back the first and sell off the second and you rake in a very plump $5.60 on this the first side of the straddle (and still two months remaining for the PUTs to produce).
We’ll be back in touch as necessary regarding any further action on the trade.
Alan B. Harvard