Today’s trade idea for option traders: Sinclair Broadcast Group (trade closed)
During the Corona crash in March – April 2020 the stock of Sinclair Broadcast Group (SBGI) fell from $30 to around $12. After the two-months-recovery the stock began to move sideways and is swinging around the level of $20. In spite of the negative earnings announcement in Q3 2020 (an operating loss of $4.18 B) there nevertheless comes a certain momentum upwards which gives to option traders an opportunity for a new trade on Sinclair Broadcast Group. So let’s dive into it, folks.
The information I am giving you in this article is for informative purposes only and should not be treated as investment advice. The information presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in trading activities related to the information in this article should do their own research and seek advice from a licensed financial adviser.
Type of a trade: Cash secured put
Alternatively: Bull put spread
Expiration: 18th December 2020 (37 days)
Premium for 1 option: between $160 and $170 on the day this article was published
Margin: apprx. $500 on the day this article was published
Pro for this trade:
– Good momentum and a long signal (I’m using the ADX-Indicator) giving a higher probability that the price won’t be pushed under the strike in the next 37 days
– In case things will go “wrong” and you will get the stock assigned, you’ll get about 3.68% dividend
– Relatively good bid-ask spread
Con for this trade:
– In case the stock gets assigned, sharp losses of $4.18B in Q3 2020 can lead to the fact that SBGI could cut the dividend. As long as COVID19 is raging, the economic situation of SGBI will probably keep tense.
Result of this trade:
You could close the position on 25th November for about $15 – $20
Profit for 1 option: $150 – 155$
Days in the trade: 14 (of maximum 37 days)