11/01/2020 Plan:
With the US Election this week, the low risk approach is to place no additional trades. For traders with a lower risk tolerance or smaller account size, that is this week’s recommendation. For those interested in placing trades, we look at a couple different “A” names – Activision Blizzard (Ticker: ATVI) and Advanced Micro Devices (Ticker: AMD).
11/1/2020 Plan (continued):
- ATVI – Sell the November 20th 67.5 put for 0.69. or the 70/67.5 put spread for 0.44
- AMD – Sell the November 20th 67.5/65 put spread for 0.40
- Prices are as of market close 10/30/2020, 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
11/1/2020 Commentary:
Both stocks have followed the recent downturn in the market. You’ll see that the implied volatility is quite high compared to the realized, making this a good opportunity to sell premium. Do not sell the ATVI put naked unless you are ok holding the stock long term.
With the US election on Tuesday, the market may see significant movement, especially if the result is contested. The safest play is to reduce risk across your portfolio and not place new trades. One can also look to add some “insurance” in the form of puts or VIX, but note that they are expensive. For most traders, simply waiting until after the election is easiest and I personally am deferring a lot of trades until after that point.
The return on the AMD spread if it expires worthless is 19% (40/210 = 19%).
The return on the ATVI spread if it expires worthless is 21% (44/206 = 21.4%). The naked put is a little over 1%.
Reach out with any questions on this or any other trade!
11/2/2020 Entry:
Sold the 67.5/65 AMD put spread for 0.37 in small size. Deferring other trades until after the election. No harm in Skipping this week’s trade. The market will still be there next week!
11/8/2020 Update:
AMD really took off in the last week, resulting in the put spread being almost worthless (0.01 – 0.02). Nothing really to do with this trade other than close it for a win!
11/15/2020 Update/Close:
The spread can be bought back for 0.01 or 0.02. You can also just close out the short leg (for 0.03) and be left with a tiny AMD catastrophe long put at 65. I closed for 0.02.
