Today’s trade idea for option traders: The Interpublic Group of Companies (trade closed)
(Last Updated On: 17. February 2021)
Interpublic Group is an ad giant. The companies of the Group are specialized in all kinds of advertising, digital marketing, communications planning, media, public relations and so on. IPG’s revenue in the Q3 2020 demonstrated resilience in the face of the pandemic due to the steps taken to position the company as a strategic partner to its clients. And in the past days, the price of this stock knocked at the pre-pandemic level. Although there was a bounce, it could also be just a pullback. Therefore, this is giving an opportunity for a options trade. So let’s check it out, 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 (in the money)
Alternatively: Bull put spread
Expiration: 19th February 2021 (42 days)
Premium for 1 option: between $205 and $220 on the day this article was published
Margin: apprx. $570 on the day this article was published
Pros for this trade:
– A long signal (I’m using the ADX-Indicator), giving a higher probability that the price will be pushed above the strike in the next 42 days
– An extraordinary dividend of around 4.19% in case you get the stock assigned (Source: finviz.com). Please note: the dividend percentage changes permanently because it’s also dependent on the price of the security. Therefore, it’s always a snapshot!
Cons for this trade:
– Low IV Rank of 14% and low IV Percentile of about 29% (Source: Trader Work Station)
– A bounce from the resistance level before the Corona crash which at the level of around $25.20
Result of this trade: You could close the position on 17th February 2021 for about $90 – $115
Realized profit for 1 option: $95 – $105
Days in the trade: 40 (of maximum 42 days)
In total, it was not the best trade but at least you could close it with around 48% profit. Even if the price couldn’t stay above the strike level, you could profit just from the decay of the time value of the option.
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