Below is a daily chart of RH (RH), $32.24.
Trade: We recommend selling 10 Apr $25/20 bull put spread (53 DTE) for $400 or better (current mid-point).
Technical Setup: Pro Gap Breakout last Friday and bottoming weekly chart.
Option Strategy: Bull Put Credit Spread. Defined risk strategy where you make maximum profit (net credit received) if the stock closes above the short put strike at expiration. We sell put strike price below support where the pattern suggests that the stock will not close under at expiry, and simultaneously purchase lower strike put than the one sold as a hedge and to reduce margin. The return on investment (ROI) is the credit received divided by the maximum loss (i.e., width of strike prices less premium received). The breakeven is the higher strike price less credit received (i.e., also your cost basis if assigned the stock). Considered a mildly bullish strategy since we are not buying calls or stock and just calling a short-term bottom in the pattern. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time with the technical pattern.
Stop Loss: $24.88.
Below is a daily chart of Under Armour, Inc. (UA), $19.23.
Trade: Under $19.20, we recommend selling 10 Apr $20/22.5 bear call spread (53 DTE) for around $550 (current mid-point is $.58/share).
Technical Setup: Rolling over after weak bounce from Pro Gap Breakdown.
Option Strategy: Bear Call Credit Spread. Defined risk strategy where you make maximum profit (net credit received) if the stock closes below the short call strike at expiration. We sell call strike price above resistance where the pattern suggests that the stock will not close above at expiry, and simultaneously purchase higher strike call than the one sold as a hedge and to reduce margin. The return on investment (ROI) is the credit received divided by the maximum loss (i.e., width of strike prices less premium received). The breakeven is the lower strike price less credit received (i.e., also your cost basis if assigned the stock). Considered a mildly bearish strategy since we are not buying puts (or shorting stock) and just calling a short-term top in the pattern. Trade has positive theta (meaning you make money on time decay) making it a high probability trade since we time with the technical pattern.
Stop Loss: $20.26.
Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra
Managing Director and Pristine Founder
Dan Gibby
Chief Options Strategist
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Twitter: @GregCapra
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