Below is a daily/weekly chart of iShares Russell 2000 ETF (IWM), $142.72.
Trade: Consider buying Aug (8/18) $135 calls (30 DTE) and selling Aug (8/4) $145 calls (16 DTE) for a limit of $7.65/share).
Technical Setup: Bullish breakout all time frames after multi-week/month consolidation.
Option Strategy: Bull Call Diagonal (BCD). Bull Call Spread except the ITM Call is longer dated to take advantage of longer Directional Bullish setup. Max Profit (estimate) is the width of Call strikes – Debit. Breakeven (estimate) is the Long Call strike price – Debit.
We recommend .70 Delta ITM Calls and short Calls (less than 30 DTE) above resistance where think will expire below at Expiry. Goal is to profit as stock rises with ITM Call and routinely sell OTM calls to earn $$ from time decay.
Similar to Covered Call except ITM Call replaces long stock. Done to reduce the risk of loss and lower cost of long call. Caps gain but increases probability of profit since lower break even and less Max Loss than long call only.
Stop Loss: $140.48.
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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NOTE: Master Trader will show opening and closing prices of all stock and option trades. We do not recommend proper share size for your particular trading style, risk tolerance, or account balance. We urge you to calculate your own share size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk.
NOTE: Master Trader and its representatives might have existing positions in these and other trade recommendations before or after suggested herein. Additionally, we often manage them differently for internal purposes based on different risk parameters than noted herein.
