It’s been a while since I published a new trade idea. The reason for this was that since a couple of weeks the most stocks were rather bearish than bullish. Besides that, the Implied Volatility was too low to get a decent premium. And what should you do in such periods? The answer is simple – do nothing! Stay out of the game and wait, don’t force it. The next opportunity will come for sure which is maybe right now. That’s why I like to publish the next trading idea on options. This time it’s again Bed, Bath and Beyond. I already published a trade on this stock (check it out here). So let’s see if the idea will work out on this stock again.
Disclaimer:
The information I am giving you in this article is for informative purposes only and should not be treated as investment advice. The information presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in trading activities related to the information in this article should do their own research and seek advice from a licensed financial adviser.
Type of a trade: Cash secured put
Alternatively: Bull put spread
Expiration: 21st September (56 days)
Strike: $27
Premium for 1 option: between $205 and $195 on the day this article was published
Margin: apprx. $460 on the day this article was published (Please keep in mind: the margin size depends on your account size. The smaller your account size the higher the margin requirements. The margin I’m publishing here is the margin based on my account size. Therefore, it could also happen that with a small account, you would see a margin of more than $2000)
Pros for this trade:
– Based on the signal I get (ADX-Indicator), the price should continue to move sideways and to stay above the strike so we can get rid of the put option when the time is right
– Apparently improved fundamentals through BBBY’s new management team could support the price of this stock and keep it above the strike
– A dividend of 2.37% on the day the trade idea was published, in case the price would fall below the strike and you would get the stock assigned (Source: finviz.com)
– A relative low Fear & Greed Index of 32
Cons for this trade:
– A pretty low IV Rank (around 13) and IV Percentile (around 11%)
– As trading with options is also a dealing with probabilities, every assumption could turn out as a wrong estimation so at the end the stock would land in the money and you would close the position with a loss (in case you don’t want to keep the stock)
Follow me on LinkedIn or Reddit and don’t miss my trade ideas.
Result of this trade: t.b.a.
Realized profit for 1 option: t.b.a.
Days in the trade: t.b.a.
Would you like to learn how to trade options in a serious way without false promises and beyond the gambling ambitions of the masses? Then enroll in an online course on Udemy*. Also check my course I created to show you how to profit from crashes in the stock markets with reversal signals*.
