10/16/2021 Plan:
This week we look at Axon Enterprise (Ticker: AXON)
10/16/2021 Plan (continued):
- AXON – Sell the Nov 19th 150/145 put spread for 0.60
- DKNG – Sell the Oct 29th 44/41 put spread for 0.32
- RBLX – Sell the Nov 5th 69 put for 0.66, if you will take shares
- Prices are as of market close 10/15/2021, actual fill and strikes may differ depending on Monday’s open, post will be updated accordingly.
- All trades are for educational purposes and do not constitute advice
10/16/2021 Commentary:
AXON reports earnings during this trade, so note that there could be a big move that impacts this trade. I’m bullish on AXON long term and with $27 between the current price and the short strike, I’m willing to take the risk.
The DKNG trade is a decent risk reward for a riskier name overall. This adds volatility to your account, so feel free to pass.
If you want to go long shares in RBLX, I think selling puts at or below the 70 strike is a good way to do it. RBLX bounced right off of 70 (dipping below briefly, but closing above it) and I think this put has a high probability of expiring worthless.
Feel free to Reach out with questions on this or anything else!
10/18/2021 Entry:
Market moved up after opening down. Sold AXON Nov 150/145 put spreads for 0.45. DKNG Oct 29 45/42 put spread for 0.30 and RBLX Nov 5 70 put for 0.70. Note higher short strike in DKNG. One could sell the 155/150 in AXON as well for more credit, lower probability.
10/24/2021 Update:
The AXON put spreads are down to 0.35 at the midpoint for a $10 profit so far. No change planned this week on the trade with AXON still above $180 and over $30 of room between the underlying and short strike.
We are down our DKNG put spreads and they expire this week. We still have a bit of room to the 45 strike and I plan to hold for a couple days assuming that strike isn’t breached. If it does go below 45 we can close and take the loss or roll. Note that if we roll, we’ll have earnings next week which will add volatility to the play (we expect a big move one way or another with earnings). If your account size cannot handle a total loss on this position, simply close it and wait for a new trade.
Our RBLX put is performing very well – only worth about 0.20 at this point, for a profit of $50 per put sold in just 1 week. With 2 weeks left in the trade, feel free to take it off now and redeploy the capital. I’ll probably leave it on this week personally and look to capture another $10 in decay.
10/31/2021 Update:
AXON sold off during the week, but ended with a nice pop on Friday nearly returning to 180. No real change in the price of the spread and we’ll look to hold for another week. Earnings are Next week and when we’d expect to see some decay in these options (assuming AXON doesn’t plummet).
Our DKNG put spreads expired worthless adding $120 of profit to our accounts ($30/spread). A nice win although the stock selling off most of the week made it a bit more “interesting” than I like.
I closed the RBLX put for 0.05 on Friday (had an open order and just realized today it filled). You can close tomorrow for 0.03 or 0.04 to free up the margin associated with this put and book the win. This brought in $65/put sold.
11/7/2021 Update:
With our AXON put spreads pretty far out of the money and earnings on the 15th, no action is planned for this week. We’ll collect a little theta this week, but realistically not much as earnings are still between now and expiration.
11/13/2021 Update:
AXON reports earnings after the market closes on Monday. The short strike (150) is currently about $20 out of the money (AXON closed at 170 and change on Friday). The expected move for the whole week is about $15. Earnings plays are volatile and we’d be a bit more comfortable with the trade if AXON was still trading at 182+ like it was last week. Most earning seasons since the pandemic started have Underperformed the straddle, but this earnings season has seen the underlyings outperform (on average). If you can’t stomach a complete loss in this position, do close it out Monday AM. I’ll personally be holding on and will even take shares if it lands between 150 and 145.
11/21/2021 Close:
AXON closed the week at 181.88, a bit more than $30 above our short 150 strike. We collected the full premium on this trade of $45 per put spread. A takeaway from this type of trade is that when we include earnings, it takes Much longer to collect the premium. This is because with a known volatility event, the prices will remain high until after that event completes. If you are looking at options that seem more expensive than normal, this is often because of earnings or some significant announcement (think trial results for a biotech).
