11/15/2020 Plan:
This week, we look at a couple put spread ideas and some put sales. The main trade is a put spread in Johnson and Johnson (Ticker: JNJ).
11/15/2020 Plan (continued):
- JNJ – Sell the December 18th 140/135 put spread for 0.56
- AMD – Sell the December 18th 72.5/70 put spreads for 0.40 x2
- DAL – Sell the December 18th 27 put for 0.29
- DOW – Sell the December 4th 45.5 put for 0.39
- Prices are as of market close 11/13/2020, 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
11/15/2020 Commentary:
With the markets significant movement, you will see that many names are now moving more than the options imply. Implied Volatility of JNJ, however, remains higher than realized. We go back to the 140/135 put spread and look to capture 0.56 on 4.44 of risk for a potential 12.6% return.
Note that three of the trade ideas expire on the same day, if we have a significant downturn, all three could be challenged. Consider picking one or two or size accordingly.
AMD has been above the 72.5 level since July and this is a straightforward play that the trend continues.
DAL is a play to go long Delta Airlines at a much lower price. Do not place this trade unless you want the shares. We carry over an idea from last week with DOW at a higher strike as the name has moved up with the broader market rally.
As with past put sales, it is recommended that they are done cash secured and that you are willing to hold the stocks long term.
Reach out with any questions on this or any other trade!
11/16/2020 Entry (Optional):
With the market up again this week, the prices were lower than desired. I entered the JNJ 140/135 for 0.49. Would have preferred a bit more credit. Ok to pass on this one if it is not enough for your personal risk/reward. AMD put spreads could be filled for closer to 0.30 and the DOW puts were available at similar prices for the 46.5 strike. You would have to roll up further for Delta Airlines (DAL).
11/22/2020 Update:
JNJ was down after the trade and if you entered the trade, we’re down a bit. No management/change at this point with plenty of time left.
AMD is up nicely with the spread only worth about 0.18 at this point. No change here, likely to simply collect additional decay for this week.
DOW and DAL puts are also profitable and can be taken off when your profit target is reached.
11/29/2020 Update:
JNJ is still down a bit. With the stock at 144 and a few weeks to go, we don’t plan to adjust this week. The DOW put is far OTM and is unlikely to be challenged. It can be closed at any time. The AMD put spread can be closed for 0.09 to book a win and free up capital. It is almost $15 OTM at this point with a few weeks to go.
12/6/2020 Update:
A big run-up in JNJ this week leaves our put spread worth only 0.08 and it can be closed at any time for a tidy profit. Similarly for AMD, our put spread is essentially worthless (just worth 0.02 or 0.03 and can be closed at any time for another win!
The DOW puts are FAR out of the money and can be closed for a few cents bringing in our third profitable trade. This one expires this week, so keep an eye on it if you don’t cloe it. Another play is to buy another put at the 50 strike, for example and turn it into a put spread as cheap crash insurance.
12/13/2020 Update:
The DOW puts expired worthless, bringing in the full $41.
If you still have the JNJ put spreads or the AMD put spreads open, please note that they expire this week. They can be closed at any time for a very nice profit.
12/20/2020 Close:
Both the JNJ and AMD put spreads expired worthless for $49 for the JNJ spread and $58 for the two AMD put spreads ($29/spread). Pretty straightforward trades and some more money in our pockets!
Reach out with any questions on this or any other trade!
