You and Your Little Dog, Too — November Options Expiry: The Pelosi Edition (LMT, BJ/VOD, FSLR, ACM, CXM, AEO, ABBV, XOM)

We start the rundown today with our LMT trade that arrived in your inbox on October 31^st in a letter called Fly Me to the Moon on a Hypersonic ICBM…

There, we urged you to sell the LMT November 18^th 500/505 CALL spread credit for $1.10 and buy the LMT November 18^th 460/455 PUT spread for $1.20.  Total debit on the affair was $0.10.

And now…?

With the shares closing last night at $472.77, chances are everything will expire worthless and we’ll be out our initial dime on the transaction.

That said, there’s an outside chance we’ll get a steep tumble in price, and the long PUT will end in-the-money by a scratch.

We stress OUTSIDE.

Our BJ/VOD pairing was sent October 3^rd in a dispatch entitled A Tale of Two Equities.

There, we recommended you sell the BJ November 18^th 70/75 CALL spread for $2.20 buy 3 VOD January 20^th 10/11 CALL spreads for $0.74 each.  Total debit was $0.02.

And…

Today the BJ side of the trade expires (VOD still has two months).

With BJ showing tremendous weakness—but not quite enough (the stock was down almost 9% intraday, but closed down by just 5.55%), we have to act.

With S&P futures flat to slightly lower, our short CALL spread will likely end up $4.00 in-the-money.

To offset any potential loss we’re:

• selling the BJ December 16^th 70/75 CALL spread for a credit of $2.85 (5.40/2.55) AND
• closing out our long VOD spreads for $0.76 each (1.48/0.72).

That will put us in a credit position of roughly $1.11 (exact numbers after the close), with one short BJ spread in hand.

Stay tuned.

———————————

Blackout—Solar Panels Fail… contained our FSLR initiative of September 12^th.

The trade had you sell the FSLR November 18^th 135/140 CALL spread for $2.10 and buy the FSLR November 18^th 100 PUT for $2.04.  Total credit on the bet was $0.06.

Today, our short FSLR CALL spread is in-the-money for the full $5.00 value and therefore requires repair.

Like this—

Set the FSLR January 20^th 160 synthetic short* for a credit of $5.55 (16.80/11.25).

That will flip the debit to a credit of $0.61 and offer us another two months to profit from FSLR’s downside.

[*Sell the CALL and buy the PUT.]

N E X T !

On August 22^nd, When the Towers Tumble Again brought you our ACM trade.

There, we recommended you sell the ACM November 18^th 75/80 CALL spread for $1.80 and buy the ACM November 18^th 77.50/75 PUT spread for $1.90.  Total debit on the trade was $0.10.

Today, ACM opens at $78.67, meaning we’re on the hook for at least part of the short CALL spread.

ACTION: set the ACM January 77.50 strike synthetic short* for a credit of $1.30 (4.40/3.10).

That will reduce our debit to roughly $2.47 (more precise numbers at the closing bell) and give us two more months to profit from the downside.

[*Sell the CALL and buy the PUT.]

Our CXM trade details can be found HERE.

In brief, we’re holding a debit of $2.15 and the 10 strike CXM synthetic short expiring this eve.

With CXM closing last eve at $8.33, we’re still $0.48 away from breaking even.

So we’re acting thus—

Set the CXM February 17^th synthetic short* with the 7.50 strike for a credit of $0.75 (1.50/0.75).

That will put us into a credit position on the trade of roughly $0.30 (exact numbers after the bell) and three months to profit from CXM’s weakness.

[*Sell the CALL and buy the PUT.]

———————————

The particulars of our AEO initiative can be had HERE.

Essentially, we’re holding one lot of shares with a breakeven of $15.57, but price is only at $12.56 as of last night’s close.

AEO is showing significant strength of late, than G-d, so we’re going to sell premium to reduce our adjusted cost base for the shares and (eventually) with G-d’s help pull out a nice win.

Like this—

Sell the AEO February 17^th 15 CALL for $0.62.

That reduces our breakeven to $14.95, and sets us on a path to Bo Diddley stardom.

Can you believe this guy…?

The run-down on our ABBV venture can be found HERE.

Bottom line is we’re holding a debit of $4.90 and a short 155 CALL expiring this eve.

And that means…

We’ve still got to cover the outstanding debit.

ACTION: set the January 20^th ABBV 145 synthetic short* for $6.95 (10.65/3.70).

That flips our debit to a credit of $2.05, and leaves us in the running to profit from weakness.

[*Sell the CALL and buy the PUT.]

Finally, our XOM number, whose details can be accessed HERE, sees us with a debit of $0.60 and the 82.50 synthetic short expiring this eve.

As we’re underwater with the short CALL, we’re acting thus—

We’re re-setting the XOM April 21^st 82.50 synthetic short* for a credit of $31.04 (32.45/1.41).  That will bring us very close to breakeven and open the downside to further gains.

Full details after the bell.

[*Sell the CALL and buy the PUT.]

May the good Lord bring us through these end times safely.

Eschatologically yours,

Alan B. Harvard

Follow @HughLOHaynew