ANF reports earnings today. It beats expectation, and expected to be profitable in the next 4-6 quarters by analysts.
Stock gapped up this morning now at $40.
STO Nov 39 put 0.55
BTO Nov 35 put at 0.05
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Net Credit 0.5
Max Risk: 4 - 0.5 = 3.5
ROR = 0.5/3.5 = 14% in 7 days.
BE: $38.5
PE: let both options expired worthless.
SE: Accept assignment at cost base $38.5. Turn into covered call/collar trade.
Posts
Joseph,
ReplyDeleteSeems like a good trade!
With Nov expiration about 1 week ago, a 50 cents credit for a spread of 4 is not bad.
Be ready for a temporary pullback and SP may go ITM and you have to assume ownership and collar it.
It should not be a problem as the outlook for this stock is quite positive.
Comment by Ted:
ReplyDeleteA break out like this would make me do a calendar call diagonal. Bull put risk is a brief pull back for profit taking.
Bought back Nov 39 put at $0.05. Don't want to take any risk of being assigned (though low probablity) and ANF gaps down next Monday.
ReplyDeleteJoseph,
ReplyDeleteIt is a good conservative idea. There is a possibility that ANF will break down on Monday. Now, it stands above the break away gap support at 39. If it fails, the whole trade will be down.
I tried closing but was not filled. I cancelled it to see whether I will be assigned. The whole market is having some strengths and ANF short term 30 mins are recovering. So, my bull put may expire.
If not, when I am assigned on Monday, I will simply sell the stock away. I will not collar this stock.