Happy New Year! We have a lot of exciting projects we are working on so get ready for some superior education and awesome trades to generate income and wealth!
Below is a daily chart of AK Steel Holding Corporation (AKS), $10.38:
Trade: We recommend buying 10 Jan $11.5 puts for a net debit of $1,600 (so only paying $.10/share time value) when it trades under $10.
Strategy: Breakdown following multi-week consolidation and extended weekly and monthly charts.
Max Gain: We will look for a fall to the $9 area, which would deliver a $1,000 profit.
Max Loss: $1,600 (debit), but will be less with stop posted.
Breakeven: $9.90.
Stop Loss: $10.82.
Below is a daily chart of Caterpillar Inc. (CAT), $93.31.
Trade: We recommend selling 10 Jan $98 naked calls (16 DTE if enter tomorrow) for a net credit of $300 or better (currently trading at $.37 x .39) provides trades under today’s (1/3) low.
Strategy: False breakout and Topping Tail from topping pattern.
Max Gain: Credit received of $300 which is realized if the stock closes below the short strike by expiration.
Max Loss: If assigned, will have a cost basis of $98.30/share.
Breakeven: Short strike price plus premium received.
Stop Loss: $95.32.
Adjustments and Comments on Open Trades
All of our trades worked perfectly and we were able to generate some nice income on the recent option selling trades, including the recent retail bear call spreads. We are thus closing a few of them at virtually maximum profit to eliminate further risk prior to expiry.
FSLR – Shorted 10 Nov $35 puts for $580. Got assigned, so sold 10 Dec 32.5 calls for $1,700, converting the position into a covered call. Rolled the short Dec calls to the Jan 37.5 calls for net credit of $.85, lowering cost basis. Holding support area well, maintain stop at $31.88.
CF – Shorted 10 Dec 22.5 puts naked for a limit of $.15/share and $.20/share and for an average basis of $.175/share. Nice breakout daily/weekly yesterday, can add on pull backs. Maintain stop break even.
TER – Shorted 10 Jan $24/21 puts (i.e., a bull put spread) for $520. Closed at $.03, booking $490 gain.
SPWR – Shorted 10 Jan $6 puts for $250. Trading at .0 x .04, close for $.03 for $220 gain.
TLT – selling 10 Jan $115/112 bull put spread (30 DTE) for a net credit of $500. Current mid-point to close is $.09, move stop loss to $.15 to close or bid .05 to close.
FDX – selling 10 Jan $205/215 bear call spread (30 DTE) for a net credit of $650. Close at mid-point .07/share ($70), for $580 gain.
DG – We recommend selling 10 Jan $78/80 bear call spread (24 DTE) for a net credit of $400. Acting well, move stop loss to $75.22 to protect gains, and also bid to close or bid .05 to close for $350 gain.
BIG – Shorted 10 Jan $55 naked calls (24 DTE) for a net credit of $650. Acting well, move stop loss to $53.22 to protect gains. Also bid .05 to close for $600 gain.
TGT – We recommend selling 10 Jan $76.5/79.5 bear call spread (24 DTE) for a net credit of $430 or better on bounce. Acting well, move stop loss to $74.22. Also bid .05 to close for $380 gain.
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,
Dan Gibby
Chief Option Strategist
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Twitter: @GregCapra
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