Below is a daily/weekly chart of CF Industries Holdings, Inc. (CF), $29.51.
Trade: Over $30.00, we recommend selling 10 Apr $28/25 bull put spread (28 DTE) for mid-point (currently $.41/share).
Technical Setup: Double Bottom daily on Major Support daily and weekly time frames.
Option Strategy: Bull Put Credit Spread (BPS). 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 break-even 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 entry with the technical pattern.
Cost Basis if Assigned: $28 less Premium received (6.5% Cushion based on current values).
Stop Loss: $28.38.
Adjustments and Comments on Open Advisory Letter Trades
KBH – Purchased 10 Jul $15 calls (136 DTE) and sold the Apr 19 calls for a net debit of $2.95/share. Close half now at $3.70/share for $.75/share gain (25% ROI), and move stop loss break even.
CSX –Bought 10 Apr $50/46 bear put spread for $2.18/share. Closed half at $2.90/share. Mid-point to close is $2.45/share, move stop break even. Note: Close before 4/10 earnings.
WFT – Sold 10 Apr $6 naked puts spread for $.19/share. Move stop loss $5.61.
OIH – Sold 10 Apr $29/27 bull put spread for $.24/share. Didn’t get as much net credit as desired so bid $.10/share to close. Stop Loss: $29.28.
VLO – Sold 10 Apr $65/60 bull put spread for $.44/share. Not acting well, but maintain stop loss $65.28.
TTWO – Sold 10 Apr $60/65 bear call spread for $.72/share. Stopped break even.
AMZN – Sold 10 Apr $825/815 bull put spread for $1.10/share. Unfortunately got caught in this bullish trade before market selloff. Mid-point to close is $1.78/share so not catastrophic in light of huge drop. Try to close break even on bounce with market uncertainty and maintain stop loss under $839.
KSS – Trade #1: Sold 10 Apr $41.5/45 bear call spread for $.42/share. Covered half at $.21/share. Mid-point to close is $.10/share, try to close at that amount to eliminate remaining risk. Trade #2 – Shorted 1,000 shares of stock at $38.19. Covered half at $37.19, stopped back half break even for average $500 gain.
WYNN – We are monitor for potential breakout on the weekly and monthly charts.
ADI – Trade #1: Sold 10 Apr $85/90 bear call spread for $.60/share. Trade#2: Shorted 1000 shares of stock at $81.64 for swing trade. Stop Loss: $84.42.
CRM – Sold 10 Apr $85/90 bear call spread for $.49/share. Move stop loss $83.82 and if moves under $81, then move to $82.52.
BBY – Sold 10 Apr $47/50 bear call spread for $.29/share. Stop Loss: $46.52.
COST – Sold 10 Apr $172.5/177.5 bear call spread for $.66/share. Stop Loss: $170.32.
ABT – Under $44.59, we recommend buying 10 Apr $66.5 puts (28 DTE) for mid-point (paying no more than $.22/share time value). Note: earning 4/18. Stop Loss: $45.86.
MO – Trade #1: Shorted 1,000 shares of stock under $75.15. Closed half for $1.50 gain. Target back half is low $72s. Move stop $73.72 to protect gains. Trade #2: Sold 10 Apr $77/79 bear call spread for $.37/share. Close call spread at mid-point $.09/share, for $280 gain and eliminate risk.
FCX – Over $13.16 (the entire consolidation area), we recommend selling 10 Apr $12/10 bull put spread for the mid-point (currently $.23/share). Stop Loss: $12.08.
EWP -We recommend selling 10 May $29 naked puts at a limit of $.75/share. Note: we would not typically trade this illiquid stock but our strategy is acceptable based on our outlook. Stop Loss: None, we would love to own EWP at a Cost Basis of $28.25 if assigned.
CALL – Over $8.85, we recommend buying 1000 shares of stock. Cancel for now, acting sloppy.
QQQ – Purchased 10 Apr $132.5 puts at $2.98/share. Stop Loss: $132.52.
JBL- Bought 10 Apr $28 calls for $1.40/share. Stop Loss: $28.18.
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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