9/4/2021 Plan:
This week we look at Disney (Ticker: DIS)
9/4/2021 Plan (continued):
- DIS – Sell the Oct 8th 170/165 put spread for 0.53
- Z – Sell the Oct 1 89/85 put spread for 0.61
- Prices are as of market close 9/3/2021, actual fill and strikes may differ depending on Tuesday’s open, post will be updated accordingly.
- All trades are for educational purposes and do not constitute advice
9/4/2021 Commentary:
Disney has some pretty nice support at 170, mostly staying above it over the last 6-12 months outside of a dip in mid-May. This trade assumes the 170 level holds over the next month. Take a look at the chart above. Go ahead, I’ll wait. Note how the Implied Volatility has been above the realized volatility? When we sell options, we are basically saying that they are overpriced and that the stock will move less than the options are pricing. There is a Significant difference between these values and if that holds, we should do well on this trade.
Zillow is a riskier trade, but I like it to stay above 90 for the next several weeks. Depending on your preferences, one could actually go a bit earlier and sell the 90/85. We’ll be flexible with the exact strikes and expiration depending on how the market opens up on Tuesday.
Want some more ideas? Our last trade in INTC that was profitable is available again with the Oct 1 expiration. I also like TWTR to stay above 60. Try to craft a trade around that level and paper trade it to learn how to find your own trades. Get stuck? Email me and I’ll help. Silver members get priority, of course.
Feel free to Reach out with questions on this or anything else!
9/7/2021 Entry:
Sold Z Oct 1 90/85 put spreads for 0.70. DIS not available as it is up almost $2 although I left an order to fill some at 0.45
9/11/2021 Update:
Not a good week for our trade in Zillow (Ticker: Z). One can take it off now for the loss and move on or wait to see if it turns around. If you go down the latter path, we may lose more, but we give time for the trade to recover. I’m personally taking this route knowing that I could lose the full amount if the name sells off through expiration. A key level for me is our short strike of 90, which we’re still above.
9/19/2021 Update:
The Zillow put spreads are now profitable, worth 0.57 (we sold at 0.70). With another couple weeks before expiration, I intend to leave this position alone for the week.
9/27/2021 Update:
The Zillow put spreads have moved against us with the underlying near 90 – 90.47 at today’s close. We’ve been here before on different trades, so a quick recap on management. Leave them alone and look to close profitably later in the week. Roll them. For example, we could roll one week at the same strikes and bring in another 0.39 in premium, which reduces our overall exposure and buys us some time for Z to recover. We could also roll and Narrow the strikes to 89/85, paying about 0.04 in premium. That reduces the overall potential loss for just a few pennies and again buys us some time. It also pushes the short strike out another $1. The last option is to close for a loss now – we’d lose about 0.47/spread. We’ve made much more recently, so that isn’t a terrible outcome. Ultimately, the decision is yours based on your risk tolerance. Reach out if you need help weighing the merits of each. Personally, I plan to let it go another day or so at least. I may roll towards the end of the week if it isn’t profitable currently, but I can taken in an additional credit and/or narrow the strikes. If it Is profitable on Friday, I’ll close and book the win.
10/2/2021 Close/Update:
Interesting movement on Z – for those that were patient, they were rewarded with the put spreads expiring worthless. I, personally rolled them out a few weeks earlier in the day and will track it accordingly here so folks can follow along if they did the same. I rolled to Oct 22, 89/84 for an additional 0.13 credit and also putting the short strike a point lower (89 vs 90). This leaves us with 3 more weeks, an additional $13 in our pocket and a bit more room to the downside. Of course, Z could plummet and we would then lose more than if we just closed the trade (or waited longer for it to expire worthless). All trades have trade-offs, let’s follow this one to see how it goes.
10/10/2021 Update:
Lots of movement last week and Zillow ended up higher than it started. Our put spreads have decayed nicely and could be closed for a $74 profit/spread at this point. I intend to keep them on.
10/16/2021 Update:
Zillow has moved up above 94 and our put spreads are about $5 out of the money. They expire this week and pending a big drop in the name, we should have a very nice gain on this trade. Can also close at any time this week to lock it in.
10/24/2021 Close:
With Zillow closing at 92.21, our put spreads expired worthless. With our entry at $2.06, that’s a $412 profit (assuming 2 spreads). When we combine this with our $246 loss a few weeks ago (remember, we rolled this spread) it is a combined $166 profit across the 2 trades (or $83/spread). Rolling is not a guarantee that we’ll eventually win, but taking in an extra credit and giving us a bit more time when a stock is oversold can be a way to manage these types of trades.
