Below is a daily chart of Everest Re Group, Ltd. (RE), $217.30.
Trade: Consider shorting Sep (9/15) $160 naked puts (7.5 Days to Expiration (DTE)) for a limit of $.45/share (I got filled there after failing to get filled at $.50/share). Note: High risk because involves re-insurance risk and Hurricane Irma has caused and is threatening further imminent massive damage to the U.S. and surrounding countries.
But we noticed the mispricing in the OTM puts with 7 DTE. As you can see below, the bid on the $160 puts are greater than the $175 puts so we get more premium for further Cushion. The stock can fall $57 points in 7 days and we still make full credit received. A Delta of .04 suggests that there is statistically only a 4% chance of this happening. Premiums spiked to a 100% Implied Volatility Rank, which is the highest volatility in the past year.
Technical Setup: Climactic Buy Setup daily and weekly charts, with Major Support in the $170 area on the weekly and monthly charts. See Monthly:
Option Strategy: Short Naked Puts (SP).
Stop Loss: None now.
Below is a link to individual videos explaining in greater detail the definitions of the main option trading strategies used in the Master Trader Option Strategies Series for Investors and Active Traders to generate wealth and income.
Description of Master Trader Directional and Income Option Trades can be seen HERE
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 of Master Trader
Pristine’s Founder and Creator of the Pristine Method
Dan Gibby
Chief Options Strategist
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