6/28/2020 Plan: This week we look to sell a put spread in Walgreens Boots Alliance (Ticker: WBA)
6/28/2020 Plan (continued):
- WBA sell 17 Jul 37.5/35 put spread 2x for 0.32
- Prices are as of market close 6/26/2020, actual fill and strikes may differ depending on Monday open, post will be updated accordingly.
- All trades are for educational purposes and do not constitute advice
- As always, reach out with any questions!
6/28/2020 Commentary:
Walgreens closed at a low of 38.4 back in the middle of May and this week we look to sell a put spread below that point. WBA has declined over the last week and Implied volatility has increased since that May low. For about a 3 week hold, this trade has a return of 14.7% if it expires worthless (0.32/2.18).
Note that this trade Included earnings, which increases the risk of a big move between now and expiration. This coupled with the market being a bit more volatile and trending downward makes it a bit riskier than normal. One could do a few things to reduce risk – put on half size or simply sit this trade out. Another approach is to actually sell a call spread in the same time frame, like the 45/47 for 0.27. That would increase our credit to 0.59, but now requires the stock to end below 45 (and stay above 37.5) for the position to expire completely worthless. If one has a more neutral opinion on WBA, this is a viable approach. Depending on the cash position of the account, one could also turn this into a wheel trade, selling calls against the long stock if WBA ends between the two strikes at expiration.
6/29/2020, 6/30/2020 Update:
0.32 was not available when I place my trades WBA started the day higher. You could have gotten in for 0.25-0.27 which would be at the low end of what we’d take. Personally, I missed it. For the call spread, if interested, to go with the put spread, could be had for about 0.38 for a total of 0.65. So more in total for the two spreads, but for the base put spread a bit less. I did put on some call spreads for balance in my account. I reviewed again today and the put spreads were no more favorable.
7/6/2020 Update:
I missed selling any of the put spreads at the 0.25-0.27 range, but if one did they are down to 0.20 for a small profit with 2 weeks remaining. The call spreads are also profitable with WBA staying in a range.
7/9/2020 Close:
WBA was down sharply after earnings ending the over $3 lower for a more than 7% drop. With a bit over a week left in the call spreads, I closed the 45/47 call spreads for 0.02 for a 0.36 x 2 or a $72 win. This is a >22% win in the little over a week we held the trade ($36/$162 = 22.2%). With the post earnings drop, one can now get 0.30+ for the put spread we initially tried to sell. I’ll be waiting until after tomorrow and will re-evaluate a potential new position over the weekend.
