Below is a daily chart of VanEck Vectors Junior Gold Miners ETF (GDXJ), $33.55.
Trade: Consider shorting Jul (7/21) $31/28.5 bull put spread (29 DTE) and the Jul (7/21) $36 naked calls (29 DTE) for around current price of $.66/share.
Technical Setup: Breakout daily after stabilization, appears range bound.
Option Strategy: Bull Put Credit Spread (BPS) COMBO. 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.
Max Gain: Credit received. Cost basis if assigned is higher strike minus Credit.
Stop Loss: $31.88 on downside, will advise upside later.
Below is a daily chart of International Business Machines Corporation (IBM), $154.18.
Trade: Consider selling the following Iron Condor: sell Jul (7/21) 160/165 bear call spread and sell Jul (7/21) 149/144 bull put spread (29 Days to Expiration (DTE)) for around current mid-point of $1.57/share.
Technical Setup: Range bound after Climactic Buy Setup weekly.
Option Strategy: Iron Condor (IC). Simply, is selling both an out-of-the-money Call Spread and an OTM Put Spread. Defined risk strategy used when you expect a stock to stay range bound by expiration. You make maximum profit (net credit received) if the stock closes between the short strikes at expiration.
The return on investment (ROI) is the credit received divided by the maximum loss (i.e., width of strike prices of the largest spread less total premium received). The break-evens are the short put strike price less credit received and the short call strike price plus credit received (i.e., also your cost basis if assigned the stock).
Considered a neutral strategy since we are expecting range bound activity. 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: Credit received.
Stop Loss: $149.88 on downside; $158.22 on upside.
TRADE UPDATE:
R – Shorted July (7/21) $65/60 bull put spread for $.65/share. Short July (7/21) $70/75 bear call spread for $.45/share to convert to iron condor. Stop Loss: $63.88.
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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