Below is a daily chart of Restoration Hardware (RH).
Trade: Consider shorting Dec (12/1) naked puts (9 DTE) with Strike Price at $88 or below for mid-point or slightly less. They are spready (higher risk) so please choose the one per your Trading Plan if you trade it at all, but we will record the $87.5 short put for around $.40-.45/share (currently $.30 x .60/share).
Technical Setup: Bullish Retracement following Pro Gap from Earnings Breakout above rising 20/50-MA on daily chart.
Option Strategy: Short Naked Puts (SP).
Master Trader Tip: We love shorting far out-of-the-money (OTM) options and spreads around compelling patterns – particularly with large volatility which gives us a higher credit (Max Gain) – and with a generous “Cushion to be wrong” with the superior break even. We passionately refer to high Premium as the “Juice,” meaning we are getting paid generously for the perceived risk involved in the trade. We RH at $99.50, a short $88 strike gives us an 11.5% Cushion to be wrong and still make Max Profit.
Stop Loss: None for now.
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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