10/25/2020 Plan:
We return to Disney (Ticker: DIS) this week and also provide some additional trade ideas.
10/25/2020 Plan (continued):
- DIS – Sell the November 6th 120/117 put spread for 0.30.
- Prices are as of market close 10/23/2020, 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
10/25/2020 Commentary:
Take a look at the IV/HV chart in Disney! Implied volatility remains Well above historical volatility. Earnings aren’t until November 12th and this trade purposely expires prior. The trade does include the election, however, which adds risk and is the main reason we can sell this spread at a nice level. Disney hasn’t traded below 120 since its earnings pop last quarter.
The return if the spread expires worthless is 11% (30/270 = 11.1%).
Additional Ideas:
- Sell DOW Nov 6 45 put for 0.44 . This includes the election. DOW also has an IV well above HV, making this an attractive trade.
- Sell INTC Nov 13 45 put for 0.48. Note – includes election. I’m adding to INTC after the earnings drop, expecting a slow grind up similar to last earnings cycle
- The ALL put recommended last week has already decayed quite nicely. One can still sell it for 0.88 and get an almost 14% annualized return
For each of the put sales, make sure it is cash secured and that you are willing to take ownership of the shares. If not, pass on the trades or spread them to limit the margin/risk.
Reach out with any questions on this or any other trade!
10/26/2020 Entry:
With the market down, we can sell lower strikes for the same premium or get higher premium for the same strikes. We sell the DIS Nov 6 116/113 put spread for 0.31 or the 117/114 for 0.39. In addition, the DOW 44.5 put, Nov 6 fills for 0.49.
11/1/2020 Update:
The put spreads are higher in value after the market decline and drop in Disney. The 117/114 is worth 0.66, the 116/113 is worth 0.55. This week has the potential to be volatile given the election, which is one of the reasons we chose smaller widths and put on less risk. Depending on whether the market settles down post election or not, one may want to simply take the small loss and move on. If the election result is clear and not contested, the belief is volatility will decrease and the market will rise. If not, we could see the opposite. This trade expires this week, so if smooth returns are important to you or you have a smaller account size, I would simply take the trade off. I’ll be keeping it on.
11/8/2020 Close:
The put spreads expired worthless last week, taking in the full profit of $39 for the 117/114 and $31 for the 116/113. DIS never breached the short strike on either and the big run up last week made this an easy position to manage into expiration.
The DOW put also expired worthless, adding an additional $49 profit to our account for each put sold.
Reach out with any questions on this or any other trade!
