Below is daily/weekly/monthly chart of Wal-Mart Stores, Inc. (WMT), $71.10.
Trade: We recommend selling 10 May $65 naked puts spread (66 Days to Expiration (DTE)) for $.50/share.
Technical Setup: Pro Gap breakout daily from consolidation on Minor Support, bullish bottom on weekly and monthly charts.
Option Strategy: Short Naked Puts. Similar to bull put spread except not buying the lower strike put. We sell put strike price below support where the pattern suggests that the stock will not close under at expiry. In exchange for the premium received, put seller has the obligation to buy the underlying stock at the strike price on or before expiry.
The Max Gain is the Premium received, which is realized if the stock closes above the short put strike at expiration. The return on investment (ROI) is the credit received divided by the margin required to hold the position. The break even is the short 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.
Max Gain: $500 credit received. Cushion of 9.1% to break even of $64.50.
Stop Loss: $69.38.
Adjustments and Comments on Open Advisory Letter Trades
ROST – Sold 10 Apr $70/75 bear call spread for $550. Mid-point to close is $.43/share, move stop loss break even.
BA – Closed both Trade #1 and #2 for a total of $1,280 gain, and was left with a “free” long Apr $210 call since there was no premium left, try to sell at $.25/share.
VIAB – Sold 10 Apr $45/47.5 bear call spread $.43/share. Stop Loss: $45.12.
HTZ – Sold 20 Apr $20/17.5 bull put spread for $600. Mid-point to close is $.45/share so let’s close at $.50/share for small $100 profit since things acting questionable.
KBH – Purchased 10 Jul $15 calls (136 DTE) and sold the Apr 19 calls (45 DTE) for a net debit of $2.95/share. Note: Holding over earnings (4/12) is higher risk. Stop Loss: $15.88.
UA – Bought 10 Apr $22.5 puts for $4.25/share. Sold Mar $17.5 puts for .25/share to convert to Bear Diagonal and lower cost basis to $4.00/share. Move stop loss $18.22 (which now locks in trailing profit because of put sold and stock falling).
UAL – Trade #1: Sold 10 Apr (weekly 4/13) $79/82.5 bear call spread for $530. Closed at $.10/share for $430 gain. Trade #2: Sold 10 Mar $77/80 bear call spread for $270, and closed at $.06/share for $210 gain.
GPI – Sold 10 Apr $85/90 bear call spread $.47/share. Bid $.20/share to close and move stop loss breakeven.
CSX – Sold 10 Apr $50/55 bear call spread for $.88/share. Note: Close before 4/18 earnings. Stop Loss: $50.32.
NMM – Purchased 2,000 shares of stock at $2.25. Sold 1,000 shares at $2.60/share for $350 gain. Keeping other 1,000 shares as Core Long. Move stop loss $2.25.
WFT – Sold 10 Apr $6 naked puts spread for $.19/share. Stop Loss: None for now since bullish long term.
PNC – Sold10 Apr $135/140 bear call spread for $500). Note: Close before 4/18 earnings. Stop Loss: $132.22.
CMCM – We recommend buying 1,000 shares of stock around $11 on a pull back since it is extended. Target: $13.00. Stop Loss: $9.78. Unfortunately did not trigger and rocked, but cancel for now.
QQQ – Bought 10 Mar $129 calls for $2.63/share. Stop Loss: Trail under prior day’s low since quick swing trade.
SMH – Sold10 Apr $75/70 bull put spread for $.57/share. Stop Loss: $75.48.
JCOM – Sold 10 Apr $80/75 bull put spread for $.70/share. Stop Loss: $80.88.
MTB – Sold 10 Apr $175/180 bear call spread for $.65/share. Stop Loss: $172.44. Note: Close before 4/20 earnings.
WTW – We previously recommended a bullish trade on a breakout, but it continues to retrace into the gap. We will continue to monitor since the weekly and monthly charts are still bullish.
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All the best,
Greg Capra
Managing Director and Pristine Founder
Dan Gibby
Chief Options Strategist
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