Below is a daily chart of Apache Corporation (APA), $52.25.
Trade: We recommend selling 10 Apr $49 naked puts ((23 Days to Expiration (DTE)) at a limit of around $.40/share (trading $.31 now but extended intra-day and was $.53 this morning, so looking for price improvement on a pull back).
Technical Setup: Bullish Double Bottom on daily, weekly Climactic Buy Setup, and monthly Major Support.
Option Strategy: Short Naked Puts (SP). 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, the 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 entry with the technical pattern.
Max Gain: $400 credit received. Cost basis if assigned is $48.60 (7.3% Cushion).
Stop Loss: $49.08.
Adjustments and Comments on Open Advisory Letter Trades (Note: We are only reporting current adjustments).
WFT – Sold 10 Apr $6 naked puts spread for $.19/share. Currently trading $.09 x .11, bid $.05/close. Move stop loss break even.
BBY – Sold 10 Apr $43/40 put spread for $.36/share. Close at $.10/share for $260 gain (to offset the loss on bear call spread).
WDC – Sold 10 Apr $72.5/67.5 bull put spread for $.72/share. Closed $.25/share for $470 gain.
AMAT – Sold 10 Apr $40/42 bear call spread for $.37/share. Move stop loss $39.42.
MU – Sold 10 Apr $30/33 bear call spread for $.40/share. Move stop loss $29.21.
CF – Sold 10 Apr $28/25 bull put spread for $.33/share. Move stop loss $29.25.
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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