Author: Bryan Halliday

A few changes made today. First, we sold our long put in UBER. That leaves the 2 short puts “naked” through this Fridays expiration. One of those puts was already “naked” the other was covered by this long put. When the stock is trading around the long strike, we try to exit as early as possible in the trade. We will use this decline in the stock to do so. If the stock were around the short strikes, we would have tried to sit and remain patient.

Sell to close:  UBER Dec 19th (monthly) 80.00 strike put
Credit:  1.15
Profit of $0.50 or +$50.00 per spread

Second, we sold a put to potentially buy 100 shares of CEG. This is a longer dated short put which gives us a lot of room between current stock price and the potential buy price. However, since it is a 250 strike, this has potential to buy $25,000 worth of stock. So, this is only a good strategy if willing to own that much stock of CEG.

Sell to open:  CEG March 20th (monthly) 250.00 strike put
Credit:  3.40
Max risk = owning 100 shares at the 250 strike ($25,000 worth of stock)
Max reward = 3.40 or $340.00 per contract

Finally, we used this +$340.00 of income received to buy more shares of stock as follows:
Bought 2 shares of EQT at 54.00
Bought 2 shares of UBER at 76.64
Bought 1 share of PYPL at 62.17
Left with $16.55 left over

Micron (MU) recently announced they are getting out of the consumer memory business and will focus on AI/Data center memory products. When you have a nice performing business but shut it down to focus on the incredible high demand/high margin side of what you do, that is a good problem to have. We suspect the numbers will be strong for upcoming results for all of these memory companies.

Now, strong numbers certainly doesn’t guarantee a higher stock price (sometimes it is already priced-in). These stocks are expected to be volatile and have massive implied volatility in their options. For example, MU is expected to move by 70 points (a 140 point wide probability cone) from now to March expiration. Competitors like WDC, SNDK and others have similar I.V. in the options. That is why the butterfly has such an excellent risk/reward. We think even though a lower probability setup, worth the opportunity.

Buy to open:  MU Mar 19th (monthly) 270.00 strike call (ratio of 1)
Sell to open:  MU Mar 19th (monthly) 300.00 strike call (ratio of 2)
Buy to open:  MU Mar 19th (monthly) 330.00 strike call (ratio of 1)
Debit: 3.05
Max Risk 3.05 or $305.00
Max Reward 26.95 or $2,695.00

A couple of changes to the portfolio today.

Exited our PLTR call butterfly as it moved up above the “inverse cup and handle” zone. While it is still in a bear rally short setup. The probability of it moving to our ideal zone has taken a hit. We will take a small loss.

Sell to close: PLTR Jan 16th (monthly) 165.00 strike put (ratio of 1)
Buy to close: PLTR Jan 16th (monthly) 145.00 strike put (ratio of 2)
Sell to close: PLTR Jan 16th (monthly) 125.00 strike put (ratio of 1)
Credit: 3.25
Result is a loss of -0.60 or -$60.00

We have added a 1×2 put spread to the long put we own in SPY. This is only ideal if you own the long puts already.
Buy to open: SPY Dec 5th (weekly) 680.00 strike put (ratio of 1)
Sell to open: SPY Dec 5th (weekly) 670.00 strike put (ratio of 2)
Debit: 1.12
Max risk = 1.12 or $112.00 per spread
Max reward = 8.88 or $888.00 per spread
Since we are doing it with our long Dec 19th put, this is not a “naked” trade.

We have added a 1×2 put spread in ABNB and UBER. This has the potential to end up owing 100 shares of the stocks at January expiration. The details as follows: Buy to open: ABNB Jan 16th (monthly) 115.00 strike put (ratio of 1) Sell to open: ABNB Jan 16th (monthly) 105.00 strike put (ratio of 2) Debit: 1.25 Likely risk = 1.25 or $125.00 per spread Max reward = 8.75 or $875.00 per spread Max risk = owning 100 shares at a cost basis of 96.25/share Buy to open: UBER Jan 16th (monthly) 80.00 strike put (ratio of 1) Sell to open: UBER Jan 16th (monthly) 72.50 strike put (ratio of 2) Debit: 0.65 Likely risk = 0.65 or $65.00 per spread Max reward = 6.85 or $685.00 per spread Max risk = owning 100 shares at a cost basis of 65.65/share

It appears as though our DELL short put will expire for a max gain of the credit received. We have sold another to replace it today as follows:

Sell to open:  DELL Dec 19th (monthly) 105.00 strike put
Credit:  3.35

We have taken the $335 credit received and bought the following shares with it.
Bought 1 share of PANW at 181.13
Bought 1 share of DELL at 117.97
Leaves us with +$35.90 in cash to add to our pile as well.

In addition, using our Long SPY Dec put as part of the position. We have bought a 1×2 put spread in SPY with next Friday expiration. Since we own the December puts, this is not a “naked” position.
Buy to open: SPY Nov 28th (weekly) 645.00 strike put (ratio of 1)
Sell to open: SPY Nov 28th (weekly) 630.00 strike put (ratio of 2)
Debit: 0.60
Likely Risk = 0.62 or $62.00 per spread
Max reward = 14.38 or $1,438.00 per spread
More risk below 615.58/share in SPY but our long Dec put takes care of that risk.

Finally, we have a trade in PayPal (PYPL) that has worked wonderfully well. We need to exit the position today for as large a credit price as possible. Because we are trading near our short leg, we will exit the position near the close of trading today. So, around 3:30-3:45 p.m. ET we will close the entire PYPL position as follows (we won’t be sending another newsletter).
Sell to close: PYPL Nov 21st (monthly) 65.00 strike put (ratio of 1)
Buy to close: PYPL Nov 21st (monthly) 60.00 strike put (ratio of 2)
Credit: as large as possible

We have closed the SPY 1×2 put spread and locked-in profits. If the market continues to fall, our long puts capture it. Our approach is to stay patient if near the short leg of a 1×2 spread. Be impatient when at the long leg.

Sell to close:  SPY Nov 21st (monthly) 655.00 strike put (ratio of 1)
Buy to close:  SPY Nov 21st (monthly) 640.00 strike put (ratio of 2)
Credit:  2.63
Profit of $2.66 per spread

We exited our delta hedge in PayPal (PYPL). The risk of the stock ending up above 65/share and getting zero for the spread is now a very low possibility. It served its purpose and now we are in a great position to be successful to some extent overall. Sold all 34 shares of PYPL at 60.05 per share.