My last trade on BBBY didn’t work out due to negative fundamental news and I got 100 shares assigned. But meanwhile, the tide has turned to my favor and I could get rid of the shares with a profit. Check out the updated article, folks. The price level of BBBY seems to stabilize after the short squeeze. But the implied volatility on it is still relatively high so it’s a must have trade on Bed, Bath & Beyond. So let’s check it out.
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.
Alternatively: Bull put spread
Expiration: 21st January 2021 (573 days)
Strike: $17
Premium for 1 option: between $185 and $197 on the day this article was published
Margin: apprx. $250 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 at least sideways and to stay above the strike so we can get rid of the put option when the time is right
– Improved fundamentals could support the price of this stock and keep it above the strike
– An great IV Rank (around 57) and an outstanding IV Percentile (around 98%)
Cons for this trade:
– A relative high Fear & Greed Index of 85 which increases the risk of a stronger correction in markets in the near future
– Currently, BBBY does not pay any dividend so in case you get the stock assigned, you would have to wait (maybe for a longer time) without any benefits until you can offload it with a profit
– As trading with options is also a dealing with probabilities, every of my assumptions 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
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Result of this trade: t.b.a.
Realized profit for 1 option: t.b.a.
Days in the trade: t.b.a.
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