Updated: Sep 13, 2021
We kicked off the trading week with a good bit of activity as we entered into 5 different trades (one of which has already been closed out for profit). All of which are very similar in the sense that they have HUGE cushions, with the average downside cushion sitting at 33.21%. These have 9/17 expiries so it's important to make sure we're on the same page as far as exit strategies and position management is concerned. Here is a breakdown for each:
JOBY 9/17 7.5p @ $0.20
Breakeven price: $7.30
Cushion: 28.4% (based on entry price of $10.20)
This one was a former SPAC that was called out in our live stream last night and had some really nice premium left over post-merger. We are always wary of SPACs post-merger because the idea of a price floor at NAV (net asset value) goes out the window, but I think there is a lot of value to be had in the 7.5 area. It previously dipped down below $9 but quickly rebounded. With less than 10 trading days to expiry I think this cushion is plenty big and that 2.73% fully cash-secured return also looks really nice. Here is how the max profit (top line) and breakeven price (bottom line) look on the 180d chart for JOBY.
I think that chart alone speaks for itself as far as this cushion is concerned.
Exit plan: Ideally we wait this one out for max profit, but I'll be happy to close for $0.05 or better at any point between now and Tuesday, September 14th.
IRNT 9/17 12.5p @ .3
Breakeven price: $12.20
Cushion: 53% (based on entry price of $26)
A huge meme stock squeeze here created another really nice IV reversion opportunity for us. It has since fallen back down to the $20 level but the breakeven price of $12.20 that we've set ourselves up with has been really nice so far. Here is how our max profit/breakeven look on the 20d chart (this one only started trading a couple of weeks ago):
Our max profit point falls below a perceived level of support at roughly $15 so I like the way this sets up. I also included the implied volatility on this one (blue line below the chart) to illustrate that it's still very elevated. Think if it levels out at all over the next few days we should see that premium on the 12.5p begin to dry up.
Exit Plan: Since this one has taken a decent dive since we opened, I'm happy with the conventional wisdom of trying to close out for a 50% gain by the end of the week. So a $0.15 debit to close is our target. If it falls below our breakeven of $12.20 I'm happy to take assignment and sell October calls, which carry a ton of premium.
ZIOP 9/17 2p @ 0.25
Breakeven price: $1.75
Cushion: 20.45% (based on entry price of $2.20)
Not much to this one. Volatile biotech stock that has run up recently. Support near $1.60 and this one sets us up with a 1.75 breakeven off the bat, which if we took assignment and rolled into a covered strangle for October should be very manageable.
Trading near the lows on the 180d chart which make this a desirable entry point as we've got a decent cushion between the current stock price and our breakeven. I know I typically say to avoid biotech but this doesn't seem like the type of stock to have the insane biotech swings that we try to avoid. And even if there is a huge drop at some point in the near future, we would only lose $175 per put sold if the stock literally went to zero. Small trade here for some big premiums.
Exit plan: Close for $0.05 by the end of this week (Sep. 10) if we can. Otherwise, let it play out into next week and expire worthless/take assignment and run a covered strangle. Be sure you have a little more money available to allocate this trade in order to pull that off.
OPAD 9/17 7.5p @ 0.15
Breakeven price: $7.35
Cushion: 30.99% (based on entry price of $10.65)
And last but not least, we have our entry on Offerpad. This is another Zillow-type stock that is looking to digitalize real estate so I'm always happy to enter a stock in that space. Similarly to JOBY above, this one was a former SPAC so we should see decent support near $10, but just to be extra safe we went with the 7.5p which again should provide a lot of value at that price point for a post-merger SPAC. Here is how our max profit point of 7.50 and breakeven point of 7.35 look on the chart:
Again we've got a max profit point that is lower than the stock has ever traded for and we've got 8 trading days to go until the option expires. It's a race against time for these 7.5p to find any value and I like our chances.
Exit Plan: Happy to close these out for $0.05 by this Friday since that would represent 66% of max profit. Will re-evaluate if we don't hit that and have to take these into next week