Below is a daily/weekly chart of National Beverage Corp. (FIZZ), $98.48.
Trade: Consider shorting Jul (7/21) $90 naked puts (11 DTE) for a limit of $.90/share (current mid-point).
Technical Setup: Breakout daily after failed breakdown and bullish consolidation at prior highs.
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: Credit received. Cost basis if assigned is short strike minus Credit.
Stop Loss: $91.88.
NOTE: We are also watching SNAP for a bearish directional trade.
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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