5/24/2020 Plan: Two ideas to consider this week. As a reminder, US markets are closed in honor of Memorial day on 5/25/2020 and re-open on Tuesday, 5/26/2020.
5/24/2020 Plan (continued):
- WBA 19 Jun sell 36.5/35 put spreads for 0.29 x3.
- C – 12 Jun – sell the 40/38 put spread for a 0.30 credit x2.
- Prices are as of market close 5/22/2020, 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!
5/24/2020 Commentary:
We are yet again going back to WBA (Walgreens Boots Alliance Inc. – which is a pretty amusing name for just “Walgreens”…). At its low on May 14th it touched 36.65 before closing higher. We look to sell a longer term put spread below this level. This is a pretty tight spread for about 20%. The expected move is a bit over $3 and our short leg is right there – so despite the name needing an almost 8% move, the market is pricing it in. Size accordingly as this is not necessarily a “low risk trade”.
For Citigroup (Ticker: C), we also place the short strike close to the expected move. Citigroup has been somewhat range bound since the beginning of April, between 40 and 50. This put spread assumes more of the same for another few weeks.
These are similar trades and both will do well if the overall market rises and poorly if it drops. Keep that in mind if you decide to put on both, the diversity is limited (different industries).
5/26/2020, 5/27/2020 Update:
The market took off on Tuesday and continued on Wednesday and we were unable to get either of the trades off. If you managed to place either first thing on Tuesday, then you are sitting on a nice profit and can close out or continue to hold.
